Intel's Profits Up But Outlook Uncertain

Intel beat Wall Street expectations with a 12 percent jump in third-quarter profits over the same period last year, but CEO Paul Otellini on Tuesday cautioned investors that the turbulent economy meant the world's leading microprocessor manufacturer is having difficulty projecting fourth-quarter sales.

Intel, headquartered in Santa Clara, Calif., reported its third-quarter earnings Tuesday afternoon after the market closed. The chip giant enjoyed $2.01 billion in net income, up from $1.79 billion in the third quarter of 2007. Revenues of $10.22 billion were about 1 percent better than a year ago and a record for an Intel third quarter, CFO Stacy Smith said.

While analysts had pegged Intel for $10.26 billion in sales, a shortfall in that target was made up on the profit front by a 3.5 percent rise in gross profit margin against the previous quarter, from 55.4 percent to 58.9 percent. Smith attributed that jump in part to lower manufacturing costs brought about by to Intel's ramp of its 45-nanometer fabrication process, which delivers Intel more transistors per silicon wafer fabbed than the previous process generation.

Intel's guidance for the fourth quarter would be more wide-ranging than usual, Otellini said, due to "signs of stress" caused by the current global financial crisis. Intel expects fourth-quarter sales of between $10.1 and $10.9 billion. Due to the unusual economic circumstances, the chip maker will provide a formal mid-quarter financial update in December.

Intel's new line of ultra-low voltage Atom processors did encouraging business in the third quarter, Otellini said. Atom and associated hardware brought in $200 million in revenues, but the Intel chief admitted the company had not been able to completely meet its distribution channel's demand for the processors, which power the inexpensive, Internet-ready desktop and mobile PCs that Intel categorizes as "nettops" and "netbooks."

Otellini also said the current economic crisis was not likely to affect computer sales as badly as the 2001 Dot-Com crash, which is thought to have wiped out some $5 trillion in market value for technology. He said that the meltdown of many high-tech companies back then resulted in an influx of second-hand computers on the market, which depressed new computer sales, a situation that was unlikely to be repeated in today's financial services-driven crisis.