Intel more chipper as market 'bottoms out'

Chipmaker Intel says the worst of the downturn may be over, after beating Wall Street profit forecasts.

Last Updated: 31 Aug 2010

Intel sounded a relatively optimistic note on the technology market today, reporting first-quarter profits of $647m - way ahead of analyst forecasts, and 176% up on the previous quarter's (admittedly dismal) showing.

The chipmaker even suggested that PC sales have bottomed out, and expressed hope that its new technologies will help sales recover during the rest of the year. That was the good news - the bad news was that it refused to give any guidance on future earnings, which has dragged down share prices in the tech sector again...

In truth these latest results were a bit of a mixed bag for Intel, which is clearly still having a tough time. Its profits may have been well ahead of Wall Street forecasts, but they were still less than half the total for the same period last year. Margins were down 8%, and sales of its swanky new Atom microprocessors slumped 27%. Much of the boost to the bottom line came because its restructuring charges, tax bills and investment losses weren't as bad as expected. And it still thinks the market is too uncertain to start making any firm predictions about next quarter.

On the plus side, Intel does see some light at the end of the tunnel, with CEO Paul Otellini suggesting that PC sales ‘bottomed out' in the first quarter. Intel's UK boss Graham Palmer told MT this morning that there had been an ‘extreme correction' in the last six months, but that the market seems to have found a new (albeit lower) level. Intel's been on an efficiency drive for the last three years, so it's much better equipped to cope with the new climate.

However, Palmer insists that it's R&D investment that will see Intel through - because it's churning out new technologies that will save its customers money. For instance, it's just launched a new server processor, which is apparently nine times faster than the current crop - so companies can have fewer servers, and slash their electricity bills to boot. ‘Our job is to demonstrate that we understand that companies are under huge financial constraints, but that the technology we're providing will allow them to make capex and opex savings. That's a very compelling story,' he says.

Intel's motto, according to Palmer, is: ‘You can't save your way out of a recession'. But on both the business and consumer side (where it's banking on further growth in mobile computing and surging sales of ultra-thin laptops) it may have a tough time persuading its customers that this is a sensible strategy...




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