A crucial bellwether for the personal computer and semiconductor industries, Santa Clara, Calif., chip-maker Intel on Tuesday reported a $2 billion profit for the third quarter; a 12 percent increase from a year ago; and predicted its business should stay healthy at least through the fourth quarter.
SAN JOSE, Calif. — A crucial bellwether for the personal computer and semiconductor industries, Santa Clara, Calif., chip-maker Intel on Tuesday reported a $2 billion profit for the third quarter — a 12 percent increase from a year ago — and predicted its business should stay healthy at least through the fourth quarter.
“We are confident that our product portfolio, strong cash flow, commitment to deploying new technology and market momentum will allow us to outpace peer companies at a time when business levels are difficult to predict,” Chief Executive Paul Otellini said.
Otellini’s statement cautioned that “it is hard to know what impact the financial crisis will have on end customer demand.” However, during a conference call with analysts, he noted that the company’s products are doing well in emerging markets, especially China, and should continue to sell well in this difficult economy because PCs and other chip-powered devices help people become more productive.
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The company reported after the market closed Tuesday that its profit for the three months ended Sept. 27 was $2.01 billion, or 35 cents per share. That compares with the $1.79 billion, or 30 cents per share, from the year-ago period.
Analysts surveyed by Thomson Reuters expected 34 cents per share in profit.
Sales were $10.22 billion, just a 1 percent increase over last year, but Intel said the figure was a record for the third quarter. Analysts expected $10.26 billion.
Intel shares, which lost $1.06, 6.2 percent, to close at $15.93 during the regular session, regained some of the lost ground in after-hours trading, adding 71 cents, or 4.5 percent, to $16.64.
Given the global financial troubles, Intel’s earnings “could have been a lot worse,” said Gartner analyst Leslie Fiering. But going forward, she added, “a lot remains to be seen.”
Intel’s finances aren’t a perfect mirror of the rest of the semiconductor industry. While it is the world’s biggest chip-maker, it focuses mostly on high-end microprocessors used in such products as portable and desktop computers, where it dominates the market. Moreover, many semiconductor firms face much tougher competition in their product niches than does Intel.
Still, the financial forecasts Intel gives during its earnings reports often indicate where personal-computer sales are headed, which is of keen interest to companies that make other types of chips for those machines, said Matthew Wilkins, principal analyst for iSuppli, a research firm that tracks chip sales.
“Intel’s results are always sort of like a good top-level comment on the health of the PC business,” Wilkins said.
Because Intel spends heavily on chip manufacturing, companies in Silicon Valley and elsewhere that provide equipment for chip manufacturing also monitor its earnings as an indicator of their business’s health, said Dan Tracy of SEMI, which represents these suppliers.
After hitting $48 billion in 2000, global spending on such equipment fell sharply during the dot-com crash, he said. Since then, spending has slowly rebounded to about $43 billion last year. Even so, he said, some companies have scaled back production of information-storing memory chips.
Aside from the oversupply of memory chips, the market for consumer goods containing semiconductors generally seems healthy, according to a report Tuesday by investment bank FBR Capital Markets.
“PC chip shipments remain an area of strength relative to expectations, particularly on the notebook side,” the report said.
Information from The Associated Press is included in this report.