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Intel Raises Its 2Q Revenue Forecast
Friday June 10, 7:26 am ET
By Matthew Fordahl, AP Technology Writer
Intel Boosts 2nd-Quarter Revenue Forecast on Better-Than-Expected Demand for Chips

http://biz.yahoo.com/ap/050610/intel_outlook.html?.v=5

SAN JOSE, Calif. (AP) -- Buoyed by stronger-than-expected demand for the chips in notebook computers, Intel Corp. boosted its second-quarter revenue forecast in the latest sign that the semiconductor industry is gaining strength.
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Intel, the world's largest semiconductor company, said Thursday it expects sales to be between $9.1 billion and $9.3 billion for the period ending July 2. That's an improvement from its April prediction of between $8.6 billion and $9.2 billion.

"Demand feels pretty good right now," said Andy Bryant, Intel's chief financial officer. "It's pretty simple."

Analysts said the positive update was expected, and the stock already reflected it.

"The midquarter update is largely, in my opinion, irrelevant for the stock," said Apjit Walia, an analyst at RBC Capital Markets. "What really matters is what it does next (in the third quarter). That trend is what will dictate the stock's fortunes."

Wall Street was expecting sales of about $8.99 billion, according to a survey by Thomson Financial. Though Intel does not provide earnings guidance, analysts estimate a profit of 28 cents per share for the second quarter.

Intel reported earnings of 27 cents a share in the same period last year.

The strength in notebook chip sales isn't a surprise. Earlier this month, the research firm Current Analysis said notebook sales outpaced desktop computer sales in May for the first time in the United States.

Intel has been focusing on improving the performance and battery life notebook PCs since 2003, when it launched its Centrino brand that features a processor, chipset and wireless capability all tuned for mobile use.

Intel isn't the only chip maker to boost its guidance.

On Tuesday, Texas Instruments Inc. raised its second-quarter earnings guidance and narrowed its revenue outlook, citing higher demand for semiconductors and educational calculators.

A day later, the Semiconductor Industry Association boosted its forecast from flat to 6 percent growth in 2005, pointing to stronger demand for personal computers, cellular phones, digital televisions and digital cameras

"Our cautious forecast issued in November of 2004 was based on concerns that high energy prices and lingering excess inventories in a few segments of the industry would dampen sales in 2005," said SIA President George Scalise. "Those fears have not materialized."

Chip makers, including Intel, did briefly suffer from excess inventory in 2004, but the industry quickly recovered. The amount never exceeded $1.5 billion, Scalise said.

That compares with 2000, when semiconductor companies reported $15 billion in excess inventory that took until 2003 to work down, he added.

"Everyone has talked about the industry making a comeback, but I never really thought it was down to begin with," said Stephen Leeb of Leeb Capital Management. "There were certainly inventory issues. But, you had an absolutely blockbuster 2003 and in 2004 you saw reasonable growth -- if that's bad, then we'll take it."

In recent weeks, Intel has launched a number of new chips that it hopes will further drive growth and announced that it would supply microprocessors for Apple Computer Inc.'s Macintosh computers starting in the middle of next year.

The announcements likely had little or no impact on the current quarter, but they do suggest the company has maneuvered past the uncertainties of 2004, when it suffered a series of product delays, misfires and cancellations.

Apple CEO Steve Jobs pointed specifically to Intel's future plans as the reason for the switch from Mac chips built by Freescale Semiconductor Inc. and International Business Machines Corp.

Intel also has undergone an executive shuffle as Paul Otellini became chief executive, replacing Craig Barrett who took over as chairman. The changes, which also saw former CEO Andy Grove move to an advisory position, took effect May 18.

Intel investor relations: http://www.intc.com