Intel beats Wall Street estimates
Intel’s fourth-quarter revenue blew past Wall Street forecasts and it gave a bullish margin outlook on higher prices and firm demand for server chips, reinforcing hopes for a strong recovery in technology.
Intel said on Thursday its gross profit margin in the fourth quarter rose to a record 65 per cent. While it forecast a drop to 59 per cent to 63 per cent in the seasonally weaker current quarter, that still surpassed analysts’ average projection of 58.8 per cent.
Many analysts predict a return of corporate spending in the second half of 2010 that would lift the tech sector out of its worst downturn in decades. Some say new spending has already begun.
“The big picture is that tech remains investable,” said Wedbush Morgan’s Patrick Wang. “They’re giving us reassurance that the PC sector remains intact and more importantly, that we’re seeing incremental improvements in the economy and that we’re probably well on our way to recovery.
“What they did on the gross margin line was extremely impressive, which was due to the massive upside in revenue.”
Intel said average selling prices of its microprocessors rose from the third quarter, driving a 21 per cent revenue increase in its data center business which makes server chips, and a 10 per cent revenue rise in its PC business.
Net income totaled $2.3bn, or 40 cents a share, in the three months ended 26 December, beating expectations for 30 cents according to Thomson Reuters I/B/E/S. That was many times larger than the net income of $234m, or 4 cents a share, in the year-ago period when the company incurred a $1.1bn write-down mainly because of an investment in wireless service provider Clearwire.
“They did a nice job on the topline which exceeded our expectations. The gross margins were better than we had even expected,” said Broadpoint AmTech analyst Doug Freedman. “Looking forward, we’re encouraged by the low capital spending and the projection that gross margin would continue to operate within a very tight range,” he said.
Revenue rose to $10.6bn from $8.2bn in the year-ago period, and above the Wall Street target of roughly $10.2bn.