Intel Corp. forecast quarterly revenue above Wall Street’s expectations, defying concerns that the growing popularity of tablets and a shaky economy are eating into demand for personal computers.
Intel shares moved sharply higher after the company beat earnings expectations and said developing countries like China are fuelling demand and helping make up for slower growth in the United States and Europe.
“Guidance is well above consensus estimates, but below seasonality,” said Patrick Wang, an analyst at Evercore Partners. “They are giving us a realistic look at the fourth quarter and it seems like they are guiding conservatively.”
Intel’s processors are used in 80 per cent of the world’s PCs but the company has failed to gain traction in increasingly popular mobile gadgets like Apple Inc. ’s iPad and Google Inc. ’s Android smart phones, which have eaten into demand for laptops.
A financial crisis in Europe and high U.S. unemployment have also weighed on consumer demand for PCs.
But corporate information technology spending has held up in recent quarters despite the lacklustre economy, helping sales of Intel’s high-margin server chips. Tech companies such as Facebook are also investing heavily to build out the massive data centres.
“Emerging markets are good, enterprise is strong, the mature market consumer is a little bit weaker,” chief financial officer Stacy Smith told Reuters. “I’d say Europe was a little bit weaker than the U.S.”
Data centre sales for the world’s leading chip maker rose 15 per cent in the quarter. By comparison, sales of Intel’s Atom mobile chips plummeted 32 per cent.
Intel said revenue in the current quarter would be $14.7-billion, plus or minus $500-million. Analysts’ average forecast was $14.23-billion, according to Thomson Reuters I/B/E/S.
Shares of Intel have risen about 11 per cent this year, outperforming the Nasdaq composite index , which has been flat. Analysts recommending the company say it has been punished too much for its lag in mobile computing and point to the stock’s 3.6 per cent dividend yield.
Intel said it spent $4-billion to buy back shares during the third quarter and authorized another $10-billion for more buybacks.
The Santa Clara, Calif., company is rushing to develop more energy efficient chips for tablets and phones although it is not expected to become competitive in mobile any time soon.
It is also promoting Ultrabooks, a new super-thin category of laptops using Intel processors – similar to Apple’s MacBook Air.
Early Ultrabook models, meant to combine the best features of tablets and laptops, may seem expensive to consumers, analysts say. But as new features are added to them Intel expects the Ultrabooks to account for 40 per cent of the consumer PC market by the end of next year.
Intel’s GAAP net income in the third quarter was $3.5-billion, up 17 per cent. Earnings per share were 65 cents. Analysts on average had expected 61 cents.
Intel said non-GAAP revenue in the third quarter was $14.3-billion, up 29 per cent and higher than the $13.87-billion expected on average by analysts, according to Thomson Reuters I/B/E/S.
Shares of Intel jumped 4.66 per cent in extended trade after closing up 0.52 per cent at $23.40.
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