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Intel profits jump on strong computer demand

Strong demand for computers boosted Intel's first-quarter profit, the chip-making giant said Tuesday. Intel said it earned $1.7 billion in the period ended March 27.
/ Source: Reuters

Intel Corp. reported an 89 percent rise in quarterly profit Tuesday as sales rebounded in all regions, but the world’s largest producer of microchips said second-quarter revenue could miss Wall Street expectations.

Intel’s profit surged to $1.73 billion, or 26 cents a share in the first quarter, including a $162 million charge related to the settlement of a patent dispute. A year earlier, the profit was $915 million, or 14 cents a share.

Shares of Santa Clara, California-based Intel seesawed then dropped in after-hours trading as investors digested the hefty profit gain along with a forecast that fell short of some expectations.

Donevan Kukul, who helps manage $2.5 billion at Cohen, Klingenstein & Marks Inc., said he had hoped for a better profit margin forecast for the second quarter than Intel’s target of about 60 percent.

“I was hoping for a little bit more from a momentum standpoint,” Kukul, whose firm holds about 1 million shares, said.

Intel stock, last year’s best performer in the Dow Jones industrial average, closed up 7 cents to $27.67 on Nasdaq before the results were released. The shares dipped to $27.25 in after-hours trading on INET.

Forecast lower, but historically in-line
Intel, whose chips appear in about four of five personal computers, said it expected revenue of between $7.6 billion and $8.2 billion in the second quarter, after first-quarter revenue of $8.09 billion.

Analysts, on the other hand, had forecast second-quarter revenue of $7.9 billion to $8.4 billion, according to Reuters Research, a unit of Reuters Group Plc.

The company also said it expected second-quarter gross profit margin, a measure of the profitability of each sale, of 60 percent, plus or minus a few points.

Intel Chief Financial Officer Andy Bryant said the second-quarter revenue forecast -- about 2 percent below the first quarter -- matched Intel’s historical patterns.

“What you’ll find is the second quarter tends to be 2 to 4 percent below,” he said.

Wall Street was expecting a first-quarter profit in the range of 25 cents to 28 cents a share, with an average estimate of 27 cents, according to a poll by Reuters Research.

Revenue rose in all regions of the world from a year earlier, Intel said,
While operating income surged in Intel’s core business of making computer chips, its communications group’s losses were about unchanged from a year ago at $219 million.