Intel hits higher Q3 revenue target

IDG News Service - Intel Corp. yesterday posted third-quarter revenue in line with its own heightened expectations, in a hopeful sign that a recovery in the semiconductor industry may be under way.
For the period ended Sept. 27, Intel took in $7.8 billion in revenue, up 20% from last year's third-quarter revenue of $6.5 billion. Intel raised its guidance for third-quarter revenue on Aug. 22 from between $6.9 billion and $7.5 billion to between $7.3 billion and $7.8 billion. It later fine-tuned its estimate to between $7.6 billion and $7.8 billion.
Analysts surveyed by Thomson Financial/First Call had expected the Santa Clara, Calif., company to take in $7.7 billion.
Third-quarter net income was $1.7 billion, up 142% from last year's third-quarter net income of $686 million. This translates to earnings per share of 25 cents, two cents above First Call expectations.
"The third quarter turned out to be among the better quarters we have seen," Andy Bryant, Intel's chief financial officer, said in a conference call following the company's earnings announcement.
Revenue increased from the previous quarter by 15%, the best increase sequentially for the third quarter in 25 years, Bryant said. The 20% year-over-year growth rate was the best figure since 1996, he said.
Shipments of the company's desktop, notebook and server processors set a record in the third quarter, Intel said. Even flash memory sales were higher than in previous quarters, reversing a decline in flash memory shipments after Intel raised prices earlier this year.
The company's notebook processor business grew 30% compared with this year's second quarter, said Paul Otellini, president and chief operating officer. 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 the 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 the net loss was wider in the third quarter compared with last year. Despite the higher-than-expected sales of flash memory in the third quarter, revenue was $450 million, down from $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% 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 compared with last year.
Intel's head count decreased in the quarter compared with last year. The company employed 79,100 workers at the end of the third quarter, down from 81,700 workers at the end of last year's third quarter. Although Intel's financial picture has brightened in the past few years, it hasn't added any workers.
The company expects fourth-quarter revenue to be 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-nanometer 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 showed only modest growth in the U.S. in the third quarter, although corporate growth was slightly better in Europe and the Asia-Pacific region, Otellini said.