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NEWS: Intel's Profit Jumps 25%; CEO Sees Strong Demand
By DON CLARK
July 15, 2008 6:21 p.m.
http://online.wsj.com/article/SB121615177202555601.html?mod=googlenews_wsj

Intel Corp. reported a 25% jump in second-quarter profit, as strong world-wide demand for portable computers that use its chips outweighed a slowing U.S. economy.

The big microprocessor maker forecast further gains in the current quarter, with improved gross profit margins and higher revenue than analysts had projected.

Paul Otellini, Intel's chief executive officer, said the company is watching carefully for any impact from economic worries but has not seen any. "We see continued healthy demand for our products," he said in remarks prepared for a conference call with analysts.

Intel's shares traded at $20.71, up 24 cents, at 4 p.m. on the Nasdaq Stock Market. Following the news, the shares edged up further to $20.90.

Intel, which turns 40 years old this Friday, has been riding an overhauled product line, a lead in manufacturing technology and recent stumbles by rival Advanced Micro Devices Inc. The company's chips, which act as the calculating engines in computers, have been particularly popular in notebook computers.

As those portable PCs decline in price, demand has grown. Mr. Otellini said shipments of chips for portables topped shipments for desktop PCs for the first time -- a long-anticipated development that came earlier than expected. He told analysts that the company posted record unit shipments of chips for mobile computers, as well as chips for wireless communications and accessory products called chip sets.

Demand for low-end notebooks caused sales of a greater proportion of low-priced chips in the second quarter, however. As a result, Intel's profit margin came in at 55.4%, up from 53.8% in the first quarter but toward the low side of its forecast in mid-April of 56%, plus or minus a couple of percentage points.

Intel, of Santa Clara, Calif., has said it is experiencing strong demand for a new line of chips called Atom that are specifically designed for low-end markets, but those products did not play a big role in the second quarter, said Stacy Smith, Intel's chief financial officer.

Intel projected its gross margin will rise in the third period to 58%, plus or minus a couple of points, and reiterated a target for the full year of 57%. It put revenue for the third period at $10 billion to $10.6 billion; the $10.3 billion midpoint of that range is well above the $10.01 billion average estimate by analysts, as reported by Thomson Financial.

John Lau, an analyst at Jefferies & Co., said investors should be reassured that the company's guidance is solid, a sign that international sales are counteracting any weakness in the U.S. "Growth continues on a global scale," he said.

One headache for the company has been falling prices for chips called flash memory, which are used to store data in cellphones and other portable devices. Intel divested a business in a variety called NOR flash to a joint venture called Numonyx; second-quarter revenue from those products was "significantly lower," the company said.

In all, Intel reported net income for the period ended June 28 of $1.6 billion, or 28 cents a share, compared with net income in the year earlier quarter of $1.28 billion, or 22 cents. Revenue rose 9.1% to $9.47 billion from $8.68 billion