Intel Posts Solid Q2 On Strong PC Sales

Intel credited its better-than-expected quarterly results on its traditional stronghold, the PC market, but also said it's notching gains in the tablet market and is on track to meet a goal to ship 40 million tablets with Intel chips inside by year end.

’Our second-quarter results showed the strength of our strategy to extend the reach of Intel technology from the data center to PCs to the Internet of Things,’ Intel CEO Brian Krzanich said in a statement.

Intel's second-quarter net income surged 40 percent from the year-ago period to $2.8 billion, beating Wall Street analyst expectations. It reported revenue for the quarter up 8 percent from a year earlier to $13.8 billion, coming in higher than its previously stated guidance of $13.5 billion and beating the $13.7 billion analysts expected.

Investors sent the company's shares up about 4 percent in after-hours trading on the quarterly results to a recent market value of $157.85 billion.

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Related: Intel Ups PC Processor Revenue Estimates: Partners Cheer

Intel Tuesday also revised its yearly forecast and said it expects full-year revenue to be up 5 percent. It originally forecast flat growth. Revenue winners for this past quarter, Intel said, also included the Internet of Things market.

’My first-quarter Intel business was very strong and second quarter was nearly as good,’ said Marty Lantz, chief technical officer at Goshen, Ind.-based Intel partner MapleTronics. ’Intel has been a great partner and has helped us drive new PC and server sales with a tremendous amount of partner enablement over the past few months.’

Windows XP retirement drove most of MapleTronics' new Intel business for desktop and notebook sales, according to Lantz.

However, analysts credited Intel's strong quarterly growth to new PC growth markets, including alternative form factors, such as Chromebooks, small-form-factor PCs known as NUCs (Next Unit of Computing) and ultrathin laptops.

’This is not surprising as we’ve been predicting the renewal of many older machines, particularly in enterprises and for business users,’ research analyst Jack Gold, of J.Gold Associates, wrote in a research note. ’We expect the PC market to continue to grow for at least the next three quarters as more machines are upgraded/replaced, and the investment in new tablets continues to taper off with increasing saturation.’

The quarter is a positive sign for Intel, which was hit hard by the consumer shift away from PCs and over to smartphones and tablets. Intel has been particularly challenged by its mobile and communications business, according to Gold.

Intel’s ’mobile and communications group’ reported second-quarter losses of $1.12 billion on revenue of $51 million.

’Intel will not be able to compete in any major way with the ARM-based suppliers until they have a fully 4G/LTE SoC late this year and into next year,’ Gold said.

The challenges Intel faces breaking into new markets didn't stop the company from forecasting revenue growth for the full year.

’With the ramp of our Baytrail SoC family, we have expanded into new segments such as Chrome-based systems, and we are on track to meet our 40 million-unit tablet goal,’ Krzanich said. ’In addition, we hit an important qualification milestone for our upcoming 14nm Broadwell product, and expect the first systems to be on shelves during the holidays.’

Intel reported 8 percent growth in its desktop chip unit sales from last year with the average selling price for processors up 2 percent. The company said notebook processor unit sales increased 9 percent, with a 7 percent decline in the average selling price.

Glen Coffield, owner and president of Lake Mary, Fla.-based Smart Guys Computers, said unit sales for Intel processors were up, but revenue from Intel's other business didn’t see the same lift. ’I’m continued to be challenged by Intel margins. It’s extremely hard to make money on Intel PC systems with razor-thin margins and sometime no margins at all,’ Coffield said.

Lantz said margins were a bit better for MapleTronics and, like Intel, he remains bullish about the rest of 2014. ’At the end of the year my Intel chip sales will be up 40 percent. And right now we are ramping up big campaigns to grab a lot of end-of-life business for Windows Server 2003. Thank you, Microsoft.’