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Intel's Second-Quarter Profits Double

Posted on: Tuesday, 15 July 2003, 06:00 CDT

SAN JOSE, Calif. (AP) - Semiconductor giant Intel Corp. said Tuesday its second-quarter profits doubled from a year ago as stronger-than-expected demand for computer microprocessors offset the weakness of its communications chip business.

It's the third consecutive quarter that Intel has exceeded forecasts, though executives and analysts said there's no evidence to suggest a long-hoped-for upswing in consumer and corporate computer buying.

"I haven't seen a PC upgrade cycle. I haven't seen evidence of corporate (technology) budgets going up," said Andy Bryant, Intel's chief financial officer. "What it really feels like is more of a return of the old days where second halves are a little bigger than first halves, and if you're lucky, enough bigger you get a little bit of underlying growth."

Intel expects third-quarter sales to be between $6.9 billion and $7.5 billion - well above last year's third-quarter revenue of $6.5 billion.

The Santa Clara-based company, which celebrated its 35th anniversary Tuesday, also said its investments in research and development during the three-year-long downturn are starting to pay off. CEO Craig Barrett said the investments "continued to generate strong products."

For the three months ended June 28, Intel earned $896 million, or 14 cents per share, on sales of $6.82 billion. That compares with a profit of $446 million, or 7 cents per share, on revenue of $6.32 billion in the same period last year.

Analysts surveyed by Thomson First Call were expecting a profit of 13 cents a share on sales of $6.7 billion. In June, the company narrowed its own revenue forecast to between $6.6 billion and $6.8 billion.

"Overall, the quarter came in slightly better than we expected, led by good demand in our computing-related business, which posted solid year-over-year results," Barrett said. "We continued to see strength in emerging markets, and our Asia-Pacific region set an all-time revenue record."

Intel said its microprocessor business is performing at the high end of expectations. Sales grew nearly 12 percent, to $5.8 billion from $5.2 billion in the same period last year.

It recently released a Pentium 4 at 3.2 gigahertz and introduced new chip sets that overcome bottlenecks in the data flowing between the processor and memory and hard drive. It's also heavily marketing its Centrino brand of chips for wireless laptop computers.

"Centrino is hitting all the targets we set for it," Bryant said. "We saw good growth in the mobile space in the second quarter."

At the same time, rival Advanced Micro Devices Inc. has been struggling to boost its processors' performance and last month warned its second-quarter sales would fall $100 million short of expectations.

"It's not so much has Intel turned the corner, but has the industry turned a corner?" said Martin Reynolds, a Gartner Inc. analyst. "Intel had a pretty good-looking quarter along with great strengths in Asia-Pacific. If we go back a few weeks, we find AMD warning it's not going to have such a good quarter, with great weakness in Asia Pacific."

Without stiff competition from AMD, Intel also has been able to keep prices steady.

"The (Pentium 4) performance continues to advance, whereas AMD is dealing with a processor that, although it had a great run, is most certainly getting old," Reynolds said. "They can't quite deliver the price performance that Intel is now offering, which is now squeezing them. So Intel captures that revenue."

Corporate and consumer spending is expected to revive in the second half of the year, provided the overall economy continues to pick up.

But Intel's communications chip business continued to struggle. Earlier this year, it raised the price of flash memory used in cellular phones and saw business drop off dramatically.

In the second quarter, the communications group's revenue fell 5.2 percent, to $143 million from $127 million in the same period last year.

The second-quarter results were announced after the market closed Tuesday. Shares of Intel closed 8 cents higher, to $24.10, in regular trading on the Nasdaq Stock Market. In the extended session, they jumped another $1.20, more than 5 percent.

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On the Net:

http://www.intel.com

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