Intel says growth has returned

Intel results come the same week a survey of economic forecasters declares recession is over

In an environment hungry for good economic news, Intel Corp. delivered a share of it Tuesday in its third-quarter results, which it said offered evidence of a "recovering market."

Much of Intel's gain was driven by consumers buying mobile devices and PCs, and not by large enterprises.

"The consumer market has been what's holding the business up for the past year, definitely not the business," said Dean McCarron, an analyst at Mercury Research in Cave Creek, Ariz. Nonetheless, "we were expecting Q3 to be an improved quarter, but it's is coming in very strong."

Intel's revenue at $9.4 billion was up $1.4 billion from the prior quarter but less than the year-ago quarter of $10.2 billion. Despite continuing economic uncertainties and high unemployment, the word Intel used to describe the results was "momentum," an expectation that this will continue.

Intel said it is through the cutting phase of its business and is now "in the growth effort," said one executive said on an analyst conference call.

Intel's view follows release of a survey Monday of 44 professional forecasters by the National Association of Business Economics, which found the recession is over but that growth will likely be moderate. The unemployment rate is forecast to rise to 10% in the first quarter of next year and edge down to 9.5% by the end of 2010.

For Intel's workforce, it's hard to tell what a growth phase may look like. At this point last year, Intel had 83,500 employees, and it's down to 80,800, despite acquiring Wind River Systems Inc. for $884 million this year. Separately, a Microsoft Corp.-funded study recently predicted that Windows 7's release will add some 25,000 jobs in the eco-systems from software development to retail sales.

The outlook for chip and PC markets seems more certain.

"What I think we are seeing in the Intel announcement is a general sense of optimism in the Windows 7 announcement next week," said Charles King, an analyst at Pund-IT in Hayward, Calif.

Intel president and CEO Paul Otellini was cautious about creating any sense that chip demand will spike with the Windows 7 release on Oct. 22. PC buyers have been able to get upgrade coupons, similar to what has happened with prior Windows operating system releases, and that tends to reduce any waits to buy a PC, he said.

Corporate buyers must first qualify Windows 7 to run in their environments, Otellini said, with upgrades beginning in 2010. "We see a lot of interest in corporations around Win 7," he said.

Nathan Brookwood, an analyst at Insight64 in Saratoga, Calif., said Intel's results were "spectacular by almost every measure, and they also gave reasonably optimistic guidance for the fourth quarter." Brookwood is serving as an expert witness for AMD in its antitrust case against Intel.

But Brookwood said it's still hard to pin down "whether the results that Intel has in any particular quarter are indicative of the industry at large" or merely reflect circumstances particular to Intel.

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Patrick Thibodeau

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