Intel Brightens IT Sector Outlook With Record Q1

What a difference a year makes. Intel grew sales by 44 percent and profits by 288 percent in the opening quarter of 2010 as compared to its first-quarter performance in the trough of the global recession a year ago.

"We started this year with the best product lineup we've ever had. Demand for these products was incredible," Intel CEO Paul Otellini said Tuesday. "We're also seeing signs of corporate demand returning," he added, addressing concerns that recovery in the high-tech sector to date has been almost entirely consumer-driven.

Intel, headquartered in Santa Clara, Calif., had record first-quarter revenue of $10.3 billion and record operating income of $3.4 billion, to go along with net income of $2.4 billion and gross margins of 63 percent, while returning earnings per share of 43 cents.

The chip giant is seen as a bellwether for the high-tech industry and an early indicator of the sector's health because Intel sells the lion's share of the world's general-purpose microprocessors used by downstream manufacturers to build personal computers and servers.

During a conference call with analysts and press, Otellini elaborated on his observation that corporate demand for Intel products was showing signs of firming up. He said corporate buyers were swapping out older servers as expected, but that replacing aging PC client fleets was also becoming a priority.

"In the first quarter we were seeing real signs of PC purchases, corporate SKUs, picking up again. You're getting to the point where as CIOs start feeling better about their business, it makes sense to swap some of these [older client computers] out," Otellini said.

Next: Intel Looks Forward

Looking forward, Intel offered guidance for another record sales performance in the second quarter, projecting revenue of $10.2 billion and gross margins of 64 percent. For the year, Intel raised its gross margin guidance for 2010 from 61 percent to 64 percent.

Otellini also shared his thoughts on netbooks -- which have "settled in" at about 20 percent of the overall notebook market, according to the Intel chief -- and what some see as the netbook's successor as the hot new consumer product category, tablet computers.

"There is no corporate netbook market that we've found," Otellini said. "I view tablets much like I viewed netbooks two years ago. It's a category that will likely be market expansive."

Meanwhile, Intel has ramped its 32-nanometer fabrication facilities faster than originally planned due to strong demand for its new 32nm processors, he said. During the first quarter, Intel began sampling its future-generation chip architecture code named Sandy Bridge to partners, Otellini said, and is on target to ship the first Sandy Bridge products by the end of 2010.