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Intel sees quarterly profit soar

Posted on: Wednesday, 15 October 2003, 06:00 CDT

SAN FRANCISCO -- No. 1 chipmaker Intel on Tuesday delivered its most upbeat earnings report since the tech bust of 2000, suggesting the tech recovery is underway.

Intel's third-quarter profit more than doubled amid strengthening demand for PCs and soaring laptop sales. Its revenue was up 15% from the previous quarter, marking the company's highest third-quarter growth rate in more than 25 years.

''Intel will be leaving the downturn in better shape than it entered it,'' said Intel CFO Andy Bryant. Intel reported record shipments of PC and laptop processors, its main business.

Intel shares rose 2% to $31.84 following the news, released after the markets closed. The news also lifted rival AMD 3% to $14.01. Applied Materials, Dell and Texas Instruments also rose.

Intel was the first tech bellwether to report for the quarter. Because its chips are found in so many tech products, Intel's results bode well for the sector. It has struggled to rebound amid weak corporate tech spending. ''There has been a pickup. The question is how far it can go,'' says Mitch Zacks of Zacks Investment Research.

Intel warned, however, that tech spending by U.S. companies -- a big key to the strength of the overall economy -- remains weak. Instead, it attributed its revenue gains to strengthening consumer sales in the USA, business buyers in Western Europe, pent-up demand in Asia and emerging markets, including Russia, India and China.

''We're not looking at the U.S. and saying, 'The good times are here,' '' Bryant said.

Intel reported revenue of $7.8 billion, up 20% from a year ago and slightly above Wall Street expectations. It was the biggest year-over-year revenue jump in more than three years. It was also more than twice the average of the few tech companies that have reported the same quarter so far, Zacks says.

Intel's new chips for laptops with wireless Internet, called Centrino, ''have been a smash hit,'' says Pacific Crest Securities analyst Michael McConnell.

Thanks in part to 60% gross margins, Intel reported net income of $1.7 billion, or 25 cents a share, up from $686 million, or 10 cents a share, a year ago. That beat estimates by 2 cents a share.

''They've executed well,'' says US Bancorp Piper Jaffray analyst Ashok Kumar. ''The bigger issue is the global economic recovery.''

Byrant expects revenue for the year to be up 10% to 12%. ''Our resolve to invest aggressively during the downturn is paying off,'' CEO Craig Barrett said in a statement.

Tech stocks have been rising for months in anticipation of a rebound. Intel shares hit a 52-week high during regular trading Tuesday. Its closing price was up 107% from its recent low in February.

Intel's guidance for the current quarter didn't disappoint. It expects sales of $8.1 billion to $8.7 billion, up from the $7.2 billion posted a year ago. IBM and Apple Computer report earnings today.

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