July 19, 2005 4:00 PM PDT

Notebooks fuel Intel profits

Sales of laptop computers helped push massive sales of Intel chips during the last three months, allowing the chipmaker to report one of its highest grossing quarters ever.

Revenue totaled $9.2 billion during the second quarter, which is 15 percent better than results from last year at about this time but 2 percent less that Intel's record-breaking first quarter, 2005. Likewise, Intel said its net income came in at about $2 billion, a 16 percent jump over last year but 6 percent less than results Intel reported back in April.

In its midquarter update on June 10, Intel raised its revenue target to a range of between $9.1 billion and $9.3 billion, higher than its earlier forecast. Intel in April said revenue for the quarter would come in at between $8.6 billion and $9.2 billion. The company said it now expects that in the next three months, it should be able to rake in somewhere between $9.6 billion and $10.2 billion in revenues.

Reports this week from IDC and Gartner noted that demand for notebooks and low-cost computers led to higher-than-expected PC shipments in the second quarter of 2005.

Intel's latest notebook PC platform, formerly code-named Sonoma, is based on the Pentium M processor along with Intel's specialized Centrino chipset. More than half of the mobile processors shipped by Intel are based on the new architecture even though it is only three months old, the company said.

"Our investments in new products, advanced silicon capacity and emerging markets are paying off with growth that is outpacing the industry," CEO Paul Otellini said in a statement. "We look forward to the second half of 2005 as we ramp dual-core microprocessors into high volume, begin production on our 65nm process technology and deliver innovative new platforms."

The company did not break out separate data for its Pentium, Xeon and Itanium processors, but said overall sales of chips were at record levels. The company also noted that average selling price was slightly lower because of overall lower chip prices and a large order the chipmaker filled for Microsoft's Xbox gaming console.

Intel also noted that it shipped more of its own brand of chipsets and flash memory than in the past. On the other hand, not as many PC makers chose Intel-made motherboards or the company's wired connectivity units.

Notable stops on Intel's road map during the quarter included a deal with Apple Computer to power Apple's Mac OS computers starting in 2006, the introduction of the dual-core Pentium D chip for desktop PCs and low-cost servers, and an antitrust lawsuit filed against Intel by rival Advanced Micro Devices.

Regarding the lawsuit, Otellini reaffirmed his previous assertion that Intel competes "aggressively and fairly" around the world including Japan, where the company agreed to certain recommendations following an investigation by the Japanese Fair Trade Council.

"Over the years, Intel has been involved in similar legal issues. Every one of these matters has been resolved to our satisfaction," Otellini said. "We unequivocally disagree with AMD's claims and are confident that this latest suit, like the others, will be resolved favorably to Intel."

The chipmaking giant said it expects to spend a little extra on research and development in the third quarter (between $2.8 billion and $2.9 billion, higher than the second quarter's $2.5 billion) because it needs to transfer its production capabilities from its next generation of computer chips, built using 65-nanometer process technology, and invest in the development of wafers using the even smaller 45-nanometer process.

Intel said it will also spend $5.9 billion, plus or minus $200 million, to help support the higher demand in chips going into the holiday selling season. The company previously expected to drop between $5.4 billion and $5.8 billion on capital projects in the coming months.

 

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