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Intel third-quarter sales forecast tops estimates
Earnings » Semiconductor manufacturer’s numbers suggest strong rebound in PC market.
First Published Jul 15 2014 06:36 pm • Last Updated Jul 15 2014 06:36 pm

San Francisco - Intel Corp., the world’s biggest maker of semiconductors, forecast third-quarter sales that topped some analysts’ predictions, fueling optimism for a stronger rebound in the personal-computer market.

Revenue in the current period will be $14.4 billion, plus or minus $500 million, the Santa Clara, Calif.-based company said Tuesday in a statement. Analysts on average estimated sales of $14.1 billion, according to data compiled by Bloomberg.

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The PC market, on course for its third straight annual decline, has shown signs of improvement this year as corporate spending picked up and U.S. shipments returned to growth. Intel’s outlook indicates demand is starting to recover among consumers, who may be buying laptops and desktops again after years of opting for smartphones and tablets instead.

"I would expect continued tail winds for the corporate business," said Chris Rolland, an analyst at FBR Capital Markets & Co., who recommends buying Intel shares. "Probably consumer wasn’t that bad either."

Intel shares, which have rallied 22 percent this year, rose as high as $32.65 in extended trading following the announcement. They earlier gained less than 1 percent to $31.71 at the close in New York.

Gross margin, the only measure of profit Intel forecasts, will be about 66 percent in the third quarter, the company said. Analysts projected a margin of 62.7 percent.

Net income in the second quarter rose 40 percent to $2.8 billion, or 55 cents a share, from $2 billion, or 39 cents, a year earlier. Sales rose 8 percent to $13.8 billion. Analysts had predicted earnings of 52 cents on sales of $13.7 billion.

Gross margin, or the percentage of sales remaining after deducting the cost of production, was 64.5 percent.

On June 12, Intel raised its second-quarter sales forecast, saying demand was better than it had originally projected. It lifted its forecast to $13.7 billion, plus or minus $300 million, from an earlier projection of about $13 billion, plus or minus $500 million. The company also said it expected some growth in sales for the year, compared with a previous forecast for revenue to be little changed.

Last week, researcher IDC said second-quarter worldwide PC unit sales fell 1.7 percent, the smallest quarterly drop in two years, as demand in the U.S., Europe and Canada helped make up for declines in Asia. IDC had predicted a decline of 7.1 percent.


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Shipments have improved in the United States, where unit sales rose 6.9 percent, and other developed markets as companies replaced aging machinery running Microsoft’s Windows XP operating system, which the software maker no longer supports, IDC said.

While the PC market "hit bottom" last year and will return to single-digit percentage growth eventually, it’s unlikely to ever grow as fast as it once did, said Mikako Kitagawa, an analyst at Gartner Inc., another technology researcher.

Consumers in emerging markets who are getting online for the first time are doing so on smartphones using Google’s Android software, and are more likely to choose a tablet than a PC based on Microsoft’s Windows if they decide they need a bigger screen, she said.

"They don’t really have a good reason for why they have to have Windows because they started with Android," Kitagawa said. "We really don’t know at this point" whether emerging-market consumers will return to buying PCs, she said.

Intel has struggled to replicate its dominance in PC processors, where it has about 80 percent market share, in the market for phone and tablet chips, where it’s struggling against companies such as Qualcomm. The older chipmaker has successfully held off competition in server computers, which supply mobile devices with data. Intel has more than 90 percent of the market for servers that use PC processors, and its only rival, Advanced Micro Devices Inc., has lost orders.

"The data center will continue to be strong for Intel," said Suji De Silva, an analyst at Topeka Capital Markets, who recommends buying Intel shares. In phones, "the market just needs to see them make some early strides."



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