Intel Bucks Gloomy Trend, Posts Boffo Profits

"Intel had another strong quarter with revenue at the high end of expectations and earnings up substantially year over year," said Intel CEO Paul Otellini. "As we enter the second half, demand remains strong for our microprocessor and chipset products in all segments and all parts of the globe."

The Santa Clara, Calif.-based chip maker, which owns between 75 and 80 percent of the global microprocessor market, reported $1.6 billion in net income for the just-concluded quarter, up 11 percent from the first quarter of 2008. Total Q2 revenue was $9.5 billion, at the upper end of Intel's guidance following Q1 for between $9 billion and $9.6 billion in revenue in the second quarter.

The second quarter is traditionally Intel's weakest in terms of sales, and while revenues were up 9 percent year-on-year, they represented a 2 percent drop sequentially.

Otellini characterized the sequential revenue drop as in line with seasonality, and even at "the top end" of that expected seasonal result.

Intel's results included $96 million in restructuring and impairment charges.

Intel's mobile products accounted for $3.8 billion in Q2 revenue, or more than a third of the chip maker's total revenue for the quarter. Stressing that PC shipments continue to shift from desktops to notebooks, Otellini said he expected Intel's latest mobile technology, Centrino 2, to "ramp quickly" following Monday's official launch of the hardware platform.

Centrino 2, formerly codenamed Montevina, was originally scheduled for a June launch raising questions from analysts about Intel's position ahead of the approaching back-to-school consumer buying season.

A technical problem with Centrino 2's integrated graphics "resulted in a 30-day slip on launch," Otellini said, but contended that, "I don't think we missed much if any of the back-to-school cycle."

The Intel chief said the computing industry had grown more efficient at pushing out product after getting new processors and platforms from semiconductor companies, and consequently was able to do "multiple back-to-school" product refreshes over the course of the cycle. Otellini expected computer makers to start including Centrino 2-based notebooks in the "second round" of that cycle.

Otellini and CFO Stacy Smith faced questions about demand for Intel's new ultra low-power devices, branded Atom, overtaking the chip maker's ability to supply the processors. Smith said supply constraints were due to higher than expected demand and an internal need at Intel to hold on to some Atom chips for testing purposes, rather than a fabrication capacity issue. Otellini added that Intel had "to make sure we have enough chipsets" to complement Atom processors and that the company was expected a sharp increase in Atom shipments over the second half of 2008.

Otellini also said Intel expected to ship its 100 millionth 45-nanometer chip by the end of the year. Intel launched its first 45nm processors last November.

Intel's main microprocessor rival, Advanced Micro Devices, reports its second-quarter earnings Thursday. Last Friday, Sunnyvale, Calif.-based AMD announced it will take nearly $1 billion in impairment and restructuring charges for Q2, including $880 million in goodwill and intangible asset impairment charges related to formerly ATI-held portions of AMD's Consumer Electronics Group.