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Intel Profits Soar On PC Market Gains

Chip maker Intel has reported a surge in fourth quarter profits, as the PC market bounced back from tough times created by the economic recession.

The technology bellwether said Thursday that net income in the fourth quarter soared 875% from the same period a year ago to $2.3 billion, or 40 cents a share. Revenues rose 28% to $10.6 billion. Intel beat analysts' expectations of 30 cents a share on revenue of $10.2 billion, according to Thomson Reuters.

Intel's big increases in profits and revenue were helped by the fact that the fourth quarter of 2008 was the lowest-point in the last five quarters for the PC industry, due to the economic downturn. The company's profits in the fourth quarter last year plunged 90% year-to-year, as revenues fell 23%.

However, following a difficult first half of 2009, the PC market has been recovering, taking Intel with it. In the fourth quarter of this year, global PC shipments rose 22.1% from a year ago, according to researcher Gartner, while rival IDC pegged the increase at 15.2%. Gartner and IDC reported increases in shipments for the full year of 5.2% and 2.3%, respectively.

Most of the increase in PC sales was due to consumers buying low-priced PCs. Corporate spending was at a bare minimum, as companies held off on replacing older systems.

During a teleconference with financial analysts, Paul Otellini, president and chief executive of Intel, said he did not expect corporations to suddenly start buying in mass in 2010. Rather, he expected the year to return to a normal pattern of spending followed by corporations before the recession hit.

"We're building into our model a modest recovery of corporate purchases of PCs," Otellini said. He later added, "We're not programming into our guidance or estimates any kind of overnight recovery of the corporate market."

Compared to the third quarter, the company reported revenue increases of 10% and 21% for the PC Client and Data Center groups, respectively. Revenue from its Other Architecture Groups, which include chips for handheld devices, consumer electronics and other products, was up 22% sequentially, while sales of the Atom microprocessor, a low-power chip found mostly in mini-laptops today, increased 6%. The average selling price for microprocessors in general was also up.

Looking ahead, Intel forecast revenue of $9.7 billion, plus or minus $400 million, for the first quarter of 2010 and gross margin of 61%, plus or minus 2 percentage points. For the full year, Intel expects gross margin of 61%, plus or minus 3 percentage points. Gross margin in 2009 was 55.7%, flat to 2008.

For Further Reading:

Intel Recap: Atom, Nehalem Were 2009 Highlights