Intel shares rise 3.5% as sales exceed $9bn

Ian King, Bloomberg

Sales exceeded $9 billion for the first time in the fourth quarter, Santa Clara, California-based Intel said late yesterday. Revenue this quarter may rise to as much as $9.4bn (7bn).

Apple, which yesterday launched a new 99 iPod shuffle, and a Mac Mini computer releases its first quarter results today.

There are currently 4,700 people employed directly and indirectly at the Intel Ireland facility. There are also a further 125 people employed at Intel Communications Europe located in Shannon, Co Clare, which is the Ireland product development arm of Intel’s Communications Product Group and is dedicated to the design and development of advanced broadband technologies for network access and infrastructure devices.

Holiday demand for laptop and server computers helped Intel cut inventory by 18%, a “very impressive’ rate, said Bank of America Securities analyst John Lau in New York. Sales also gained as companies replace outdated computers, Intel president Paul Otellini said yesterday.

“Intel was some much-needed good news,” said Russ Koesterich, chief North American equity strategist at State Street Global Markets, Intel’s number two investor with 206.9 million shares. “It was right across the board a strong number and this is going to help semiconductors and the rest of the tech sector stabilise.”

Intel shares added 59 cents to $23.13 at 10:01am New York time in Nasdaq Stock Market composite trading and rose as high as $23.33. Competitor Advanced Micro Devices rose 5 cents to $14.91. Apple Computers fell 15 cents to $65.40.

Applied Materials, the world’s biggest maker of chip-production equipment, rose 2.5% to $16.55 and rival Novellus Systems increased 3.4% to $26.69 after Intel said it would boost spending on tools and plants.

Intel’s net income fell 2.3% to $2.12bn (1.6bn), or 33 cents a share in the fourth quarter, from $2.17bn a year earlier, as the company slowed to work off inventory that ballooned to a record $3.2bn (2.4bn) last year. Sales rose 9.8% to $9.6bn (7.2bn).

“Their inventory has become a non-issue and it really sets the stage for gross-margin improvement,” said Pam Hegarty, who heads the global technology group at Boston-based Baring Asset Management.

The company’s semiconductors, microprocessors that work as the engine in computers, power more than 80% of the world’s PCs. Intel is the first major computer-related company to post results after the holiday shopping season, making the chipmaker a barometer for technology spending.

“From the report, it seems that the end market for PCs remains healthy,” said Sangeeth Peruri, an analyst at New York- based J&W Seligman & Co, which manages $20bn and holds Intel shares. “A lot of people had expected their gross margin to be 55 to 56% this year, so a forecast of 58%, if they hit it, is positive guidance.”

Inventory dropped to $2.62bn (1.97bn) from $3.2bn at the end of the second quarter after Intel slowed production.

Inventory now is at 45 to 50 days, “lower than optimal,” Chief Financial Officer Andy Bryant said.

“It was strength throughout the quarter, throughout the world across most products.”

Intel experienced “strong demand” for the Centrino chips that give laptop computers wireless internet access. Notebooks accounted for almost 50% of holiday sales of PCs in the US market, said Mr Otellini, who becomes chief executive in May.

Gross margin for the quarter was 56%, in line with a company forecast of 55% to 57%. The margin will be about 55% this quarter, plus or minus a couple of points, Intel said.

Intel, like other semiconductor companies, runs its plants 24 hours a day. When it slows production, the cost per chip rises.