April 15, 2009

Intel Profit Earnings Beat Wall Street Predictions

Wall Street's bleak predictions of Intel Corp.'s first-quarter profit report went out the window on Tuesday when the California-based company's CEO announced that although computer sales had "bottomed out," they were on a fast track to recovery.

Being the only technology company to report profit gain for the first three months of 2009, Intel's achievement is especially significant.  But Intel did not offer explicit revenue direction.  It is unclear whether the company's gains are based on more PCs being purchased, or whether depleted chip inventories have been restocked by computer makers. 

Currently, Intel's net income is $647 million, or 11 cents per share, which is less than half of what they earned this same time last year.  However, analysts polled by Thomson Reuters anticipated more severe reports, with profits of just 3 cents per share.  Some analysts even forecasted the technology giant would experience profit loss for the first time in almost 25 years.

Intel sales of $7.1 billion far surpassed predictions by approximately $100 million. 

Paul Otellini, the CEO of Intel stated, "We believe PC sales bottomed out during the first quarter and that the industry is returning to normal seasonal patterns."

Having earned the position of the world's largest semiconductor company, Intel's progress helps to determine demand for personal computers, and further the company lends itself a proxy to judge the success of overall technology spending. 

It is the simple cycle of cause and effect.  When the economy is good, consumers and businesses purchase more PCs which leads PC makers to purchase more of Intel's chips.  However, when times turn for the worse, PC makers quit spending and Intel sales fall.

Analysts were anticipating PC makers to relax their grip on their wallets a little in the first quarter because it was necessary to replenish their stock of chips after draining their inventory to save money over the last few quarters. 

Eighty percent of the global PC microprocessor market share is owned by Intel, with recent shares gained from smaller rival Advanced Micro Devices Inc.  AMD is infamous for its new Atom chip.  Atom is Intel's first chip for "netbooks," which are mini-laptops with limited capabilities, but have been made popular because they are inexpensive.    


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