Intel has posted third-quarter revenue in line with its own heightened expectations, in a hopeful sign that a recovery in the semiconductor industry is underway.
For the period ending September 27, Intel took in $US7.8 billion in revenue, up 20 per cent from last year's third quarter revenue of $6.5 billion. Intel raised its guidance for third-quarter revenue on August 22 from a range of between $6.9 billion and $7.5 billion to a range of between $7.3 billion to $7.8 billion. It later fine-tuned its estimate to between $7.6 billion and $7.8 billion.
Analysts surveyed by Thomson First Call had expected the company to take in $7.7 billion.
Third-quarter net income was $1.7 billion, up 142 per cent from last year's third-quarter net income of $686 million.
"The third quarter turned out to be among the better quarters we have seen," said Andy Bryant, Intel's chief financial officer.
Revenue increased sequentially by 15 per cent, the best increase sequentially for the third quarter in 25 years, Bryant said. The 20 per cent year-over-year growth was the best figure since 1996, he said.
Last year's third-quarter revenue was flat compared to the third quarter of 2001, as average selling prices declined amid gains in low-cost PC market share, Intel said last year. It also recorded about $108 million in acquisition-related costs in last year's third quarter.
Shipments of the company's desktop, notebook, and server processors set a record in the third quarter, Intel said in a release. Even flash memory sales were higher than in previous quarters, reversing a trend of flash memory shipment declines after Intel raised prices earlier this year.
The company's notebook processor business grew 30 per cent as compared to this year's second quarter, said Paul Otellini, president and chief operating officer, on the conference call. Shipments of mobile processors are growing at twice the rate of desktop processor shipments, he said.
The third quarter is considered the second-best period for PC and notebook sales, driven by the back-to-school shopping season. Only the fourth quarter, with the holiday shopping season, generally produces better results.
The Intel Architecture business, which manufactures and sells the company's PC and server processors, remains its only profitable division. But that division posted a healthy $2.9 billion operating income, more than offsetting losses from the Communications Group and the Wireless Computing and Communications Group (WCCG).
The WCCG's revenue was lower and net loss was wider in the third quarter as compared to last year. Despite the higher-than-expected sales of flash memory in the third quarter, revenue was $450 million, down from revenue of $586 million in last year's third quarter.
Intel's business in the Asia-Pacific region continues to grow, as business in Europe and the Americas declines. Revenue from Asia-Pacific, which excludes revenue from Japan, was $3.3 billion in the third quarter, or 42 per cent of Intel's overall revenue. This is an increase from Asia-Pacific revenue of $2.5 billion in the third quarter of last year.
Revenue from both Europe and the Americas fell in this year's third quarter as compared to last year.
Intel's headcount decreased in the quarter as compared to last year. The company employed 79,100 workers at the end of the third quarter, compared to 81,700 workers at the end of last year's third quarter, as Intel has recovered from the doldrums of the past few years without adding any workers.
The company expects fourth-quarter revenue to come in between $8.1 billion and $8.7 billion. It also raised its guidance for research and development spending in 2003 from previous expectations of $4.2 billion to $4.3 billion.
Intel will ship its 90-nanometre desktop and notebook processors, Prescott and Dothan, in the fourth quarter, Otellini said.
Although the prospects for Intel's business look better than in many quarters, the company isn't rushing to declare a recovery. "As our business improves, Intel will be leaving the downturn in better financial shape than it entered," Bryant said.
However, "there's no evidence of IT budgets increasing across the board," Bryant said. Sales of processors to corporate customers only showed modest growth in the US in the third quarter, although corporate growth was slightly better in Europe and Asia-Pacific, Otellini said.