Intel sales buoyed by emerging markets

INTEL, the world’s biggest chipmaker, forecast third-quarter sales that exceeded some analysts’ estimates, buoyed by corporate computer upgrades and first-time purchases by consumers in emerging markets.

Revenue will be $14 billion, plus or minus $500 million, Santa Clara, California-based Intel said last night. That compares with $13.5 billion, the average of analysts’ projections compiled by Bloomberg. Gross margin, the percentage of sales left after deducting production costs, will be about 64%, Intel said. Shares rose after the report.

Corporate purchases of personal computers and servers and sales to consumers in developing countries such as Brazil and China are outweighing stagnant sales of laptops in the US and Europe. Greater demand for Intel’s powerful chips for business machines raises average selling prices and boosts Intel’s profitability.

“Even though things may have slowed in the US and Europe, their business has held in fairly well,” said Patrick Wang, a New York-based analyst at Evercore Partners Inc. “Consumer notebook is weak, while the enterprise has held up.” Wang rates Intel shares “equal weight”.

Intel lost 7 cents to $22.99 at 4pm New York time on the Nasdaq Stock Market. The stock has gained 9.3% this year.

Second-quarter net income rose to $2.95bn, or 54 cents a share, from $2.89bn, or 51 cents, a year earlier, the company said. Analysts on average had estimated profit of 51 cents. Sales increased 21% to a record $13bn, compared with an average prediction of $12.8bn.

The technology industry needs one server computer for every 600 smartphones in use, and one for every 122 tablets, Intel chief executive officer Paul Otellini told analysts in May. That means that even though Intel has so far failed to enter the mobile-phone processor business directly, it’s benefiting from rising demand for computer services provided over the Internet in the so-called cloud.

Gross margin, the only measure of profitability that Intel forecasts, was 60.6% in the second quarter.

Intel’s processors run more than 80% of the world’s PCs.

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