Intel Enjoys Big Q3 Bounce But Still Lags From 2008

Intel enjoyed its strongest revenue growth from the second quarter to the third quarter in 30 years but still has some catching up to do to match 2008's record sales numbers, the Santa Clara, Calif.-based chip giant reported Tuesday.

Intel beat Wall Street estimates with $9.4 billion in revenue in its fiscal third quarter, up $1.4 billion sequentially but down by about 8 percent against the same period in 2008. Third-quarter net income of $1.9 billion was up $2.3 billion over the second quarter, which included Intel's payment of a record $1.45 billion antitrust fine to the European Commission, resulting in the chip maker's first quarterly loss in 22 years.

Excluding the EC fine, which Intel is appealing, the technology bellwether raised its earnings by $807 million against the second quarter of 2009.

Intel's "better-than-expected" third-quarter performance prompted CEO Paul Otellini to reprise a prediction of even better times ahead.

"We think [global PC unit shipments] will be flat to up slightly over 2008. That's a significant change from the industry's view six months ago," said Otellini, who made a similar statement at September's Intel Developers Forum.

Otellini's view remains rosier than that of many market watchers, including semiconductor industry researcher iSuppli, which on Tuesday projected a 4 percent year-over-year decline in global PC shipments for 2009.

Going forward, Intel forecast fourth-quarter revenue of $9.7 billion to $10.5 billion. Otellini indicated that demand for PCs and the Intel processors that power some 80 percent of them globally has turned a corner following a recession dating back to the fourth quarter of 2008, while Intel's inventory supply chain has also stabilized.

"Our channel sales out have shown healthy sequential growth for three quarters in a row," he said.

Intel's overall third-quarter revenue was down by $828 million, or 8.1 percent, against the third quarter of 2008. But the chip giant made the case that the gap in year-over-year sales of its microprocessors has been shrinking with signs of an economic recovery becoming clearer. In its second quarter, again subtracting the EC fine, Intel's sales decline against the 2008 period was almost twice as deep at 15 percent.

Otellini also sought to clarify a common perception about an overall slowdown of hardware sales to enterprises during the recession. According to the Intel CEO, sales of new servers into the enterprise have actually been fairly steady in recent months, while sales of client PCs to large organizations have continued to lag.

Like many in the industry, Otellini predicted that the pending release of Microsoft's Windows 7 operating system would help spur a major PC client refresh cycle for enterprises emerging from the recession.