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Tech Investing

Intel Forecast Tops Estimates, Spurs Earnings-Season Optimism

By Ian King

(Bloomberg) — Intel Corp., the world's largest chipmaker, projected bigger first-quarter sales than analysts had estimated, a sign the computer industry has shaken off the effects of the recession.

The company forecast first-quarter revenue of about $9.7 billion yesterday, compared with the $9.34 billion average estimate in a Bloomberg survey. Santa Clara, California-based Intel also reported a surge in fourth-quarter sales and profit.

Intel expects its profit margin to hit a 10-year high this year as consumers snap up laptops and businesses loosen the purse strings on technology budgets. Intel, which supplies chips to more than 80 percent of the world's computers, was the first big U.S. technology company to give its fourth-quarter performance, kicking off two weeks of earnings reports.

"These results bode well for the entire tech market," said Bill Kreher, an analyst at Edward Jones & Co. in St. Louis. "Revenue was well above our expectations. The company is executing extremely well."

Intel rose 17 cents to $21.65 in late trading after the announcement yesterday. The shares, which climbed 39 percent last year, had closed at $21.48 on the Nasdaq Stock Market.

Intel posted its biggest quarterly revenue in more than in a year. Gross margin, the percentage of sales remaining after deducting the cost of production, was a record 65 percent. The margin will be about 61 percent this year, Intel said.

'Boy oh Boy'

"Gross margin is the metric, and boy oh boy, are they delivering there," said Michael Shinnick, a fund manager at South Bend, Indiana-based Wasatch Advisors Inc., which manages $7 billion in assets, including Intel shares.

Intel's report will be followed by International Business Machines Corp. on Jan. 19, Google Inc. on Jan. 21 and Microsoft Corp. on Jan. 28.

Fourth-quarter net income increased more than ninefold to $2.28 billion, or 40 cents a share, Intel said. It amounted to $234 million, or 4 cents a share, a year earlier, when investment writedowns crimped profit.

"My expectation for 2010 is that we're going to see robust unit growth," Chief Financial Officer Stacy Smith said in an interview. "The consumer segments of the market will stay pretty strong, and I do believe we are going to see a resurgence in PC client sales."

PC shipments increased 15 percent last quarter, Framingham, Massachusetts-based IDC said this week. That topped the research firm's earlier prediction for an 11 percent gain.

Intel's revenue rose 28 percent to $10.6 billion last quarter—the first period of growth in more than a year. In October, Intel forecast sales of $9.7 billion to $10.5 billion.

Intel plans to spend about $6.2 billion on research and development and $4.8 billion on new plants and equipment this year. The company doesn't give an annual sales prediction.

"Intel is a bellwether stock," said Leslie Fiering, an analyst at Gartner Inc. in San Jose, California. "They're always an early indicator of demand."

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