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Intel Calls A Bottom In PC Sales: "Returning To Normal Seasonal Patterns," Otellini Says


Intel has called a bottom, but it doesn?? seem like the tech sector is quite out of the woods yet. Reporting quarterly earnings for its first fiscal quarter, the company reported a $647 million profit on sales of $7.1 billion.

The results exceeded the expectations of analysts who had forecast revenue of $6.98 billion and per-share earnings of 3 cents. Gross margins were 46%, representing a drop of 7% quarter-over-quarter. Profits were also down 55% from the year-ago quarter.

??e believe PC sales bottomed out during the first quarter and that the industry is returning to normal seasonal patterns,?CEO Paul Otellini said in a statement. “Intel has adapted well to the current economic environment and we’re benefiting from disciplined execution and agility.”

Intel’s outlook, or rather what little it was willing to share about its outlook, was cautious. The company declined to give a revenue projection for the current quarter, and said only that for internal purposes it expects revenue to “approximately flat,” from the first quarter. Gross margins it said will continue to be in the mid-40s.

Concern over pressure on gross margins, and also over Intel’s lack of visibility left investors feeling cold. Intel (INTC) shares opened the day at $15.95 down three cents from their April 12 close, but rallied to finish the regular trading session up three cents at $16.01. The stock dropped more than 3% or more than 50 cents after-hours hitting $15.45 by 4:40 PM Eastern Time.

Inventory concerns are hanging over the company, says analyst Dean McCarron with Mercury Research, chip industry research firm based in Cave Creek, Ariz. “PC makers saw the problems very clearly early during the fourth quarter last year,” he says. “They saw that orders weren’t materializing and so they acted accordingly and stopped ordering new chips.” That caused Intel and AMD to both report disappointing earnings in January. “Had the PC makers not done that, it would be quite realistic to expect to see them struggling with unsold inventory through the rest of the year. ”

In the wake of reduced orders by PC makers, Intel said its inventories were reduced by $700 million during the quarter.

Signs of life in the PC industry are as yet difficult to find. JP Morgan analyst Chris Danely in an April 8 research note pegged Intel’s share of the PCs turned out by major PC manufacturers like Hewlett-Packard (HPQ) and Dell (DELL) at 87% during the month of April, up from 82% in December of 2008. Intel’s share of business at HP grew from 67% of 78% while its business at Dell contracted slightly, Danely said.

Addtionally, computers using Intel’s low-power Atom processor appeared in 5% of machines turned out by HP and Dell in April versus only 3% in December. Despite the increase in Atom business, Intel said revenue for the chip was $219 million, down 27% quarter-on-quarter.

Danely also said he expects Intel’s server business to grow during 2009, stemming mainly from the recent launch of its new line of server chips known by the codename Nehalem.


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