Intel reports 'best first quarter ever'

The company's net income rises by 288 percent

Intel on Tuesday reported strong earnings for the first quarter of fiscal 2010, with the company calling it the "best first quarter ever."

The company recorded net income of US$2.4 billion for the quarter ended on March 27, an increase of 288 percent compared to the first quarter a year ago. The net income beat estimates of $2.13 billion from analysts polled by Thomson Reuters. Diluted earnings per share were $0.43, beating analyst estimates of $0.38.

The company recorded revenue of $10.3 billion for the first quarter, an increase of 44 percent compared to last year's first quarter. The numbers also beat analyst estimates of $9.8 billion.

The company saw microprocessor and chipset revenue increase during the quarter. The company in January launched new Core i3, Core i5 and Core i7 chips for laptops and desktops, followed by new Xeon server 5600 chips in the middle of March. The chips were made using the 32-nanometer manufacturing process, which makes microprocessors faster and more power-efficient while reducing manufacturing costs. In February last year, Intel said it would invest $7 billion over the next two years to revamp manufacturing plants to lower chip-manufacturing costs and increase production.

"The investments we're making in leading edge technology are delivering the most compelling product line-up in our history," said Paul Otellini, Intel president and CEO, in a statement. "Looking forward, we're optimistic about our business as Intel products are designed into a variety of new and exciting segments," Otellini said.

Intel has produced more chips and saved more money from its 32-nm process than expected, Otellini said during a conference call to discuss the financial results. The company is now shipping more than 50 different 32-nm chip brands.

Intel estimated revenue for the second quarter to be around $10.2 billion, plus or minus $400 million. That would be a 27 percent increase over the second quarter of 2009.

The company got a boost from the improving economic environment after the IT industry hit rock bottom at around this time last year, Otellini said. Intel had record mobile-microprocessor revenue during the quarter as consumer PC purchases picked up.

Average selling prices of the Core i3, i5 and i7 processors were high, which helped improve margins and profitability, he said. Revenue for the PC client group, which sells laptop and desktop processors, was $7.7 billion, a 43 percent increase compared to the year-ago quarter.

Netbooks are levelling off at about 20 percent of all consumer laptop purchases, Otellini said. The company will come out with new netbook chips later this year, including a dual-core Atom processor, to attract buyers.

Otellini was cautious in his comments about corporate spending. He said enterprises are being careful about spending and making purchases on a per-need basis, like refreshing laptops as needs arise, Otellini said. Companies are still wondering what the year will look like going forward.

It makes sense for companies to spend on upgrading servers first as this will deliver more savings, Otellini said. The recently launched eight-core Nehalem-EX processors can deliver significant savings by consolidating 20 servers into one, and the new Xeon 5600 chips will become more attractive in the latter part of the year as prices fall, Intel officials said.

Demand for data center infrastructure such as servers could pick up in the fourth quarter, said Stacy Smith, Intel's chief financial officer, calling the projection a "wild guess."

Intel has already started sampling chips based on the Sandy Bridge microarchitecture, which is the successor to the Nehalem family used in chips today. Sandy Bridge chips will go into volume production later this year, Otellini said.

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