PCs aren't dead: Intel's best quarter ever shows $2.9B profit

Intel has reported its best quarter profit ever, selling more PC chips than ever despite the onset of tablet computers and smartphones.

That’s good, since Intel is the world’s largest chip maker and its results are a bellwether for the computer industry and the larger tech industry. Intel benefited from a burst of corporate buying of PCs. During the recession, corporations held back on spending on business computers known as servers. But after the launch of Microsoft’s new Windows 7 operating system and a general tech recovery, corporations evidently got off the sidelines during the second quarter.

Revenues for the second quarter ended June 30 were $10.8 billion, up 34 percent from a year ago. Net income was $2.9 billion, up from a loss a year ago. Earnings per share were  51 cents, compared to a loss of 7 cents a share a year earlier. Year ago figures included $1.45 billion related to an antitrust fine Intel had to pay in Europe.

Not counting the fine. Intel’s net income was up 175 percent from $1.8 billion and 33 cents a share a year ago. Analysts had been expecting earnings of 43 cents a share on revenue of $10.25 billion for the second quarter of this year.

Paul Otellini, chief executive of Intel, credited strong demand from corporate customers for Intel’s core microprocessors for the strongest quarter in Intel’s 42-year history. He said the PC and server markets are healthy and that he expects that to continue for the foreseeable future.

Intel forecast that its third quarter revenue would be $11.6 billion, compared with $10.92 billion analysts expected. While PC client group revenue was up just 2 percent from the first quarter, data center group revenue was up 13 percent from the first quarter as the server microprocessor market recovered. Intel Atom microprocessor and chipset revenue was $413 million, up 16 percent sequentially. Those chips are used in low-end computers and netbooks. Average prices per microprocessor were up slightly from the first quarter, and gross profit margin, a measure of efficiency, was 67 percent, up 3 percent from the midpoint of Intel’s predicted range of 62 – 66 percent. Gross profit margin in the third quarter is expected to be 67 percent.