Intel (NASDAQ: INTC) wasn’t expected to post any major surprises for its first quarter earnings, but with business users in the mood to start buying again, Intel did just that.
The chip giant blew past projections thanks to strength in the mobile market and the new processors it introduced in January.
As a result, for the quarter ended March 31, Intel reported revenue of $10.3 billion, well above Wall Street analyst’s estimate of $9.83 billion.
Margins were a healthy 63.4 percent and net income totaled $2.4 billion, which translated to earnings per share (EPS) of $0.43. A consensus survey of analysts by Thomson Reuters expected EPS of $0.38.
Intel’s results are likely to be good news for the rest of the technology industry, which has been looking for signs of renewed spending by IT buyers, who in turn have begun mapping out plans and making purchasing decisions around refreshing aging systems and embracing hot new areas of technology.
“A year ago at this time, the industry was in the midst of a sharp correction, with many expecting it to continue for an extended period of time, but we saw signals of it ending and began planning for it,” said Paul Otellini, president and CEO of Intel, on a conference call with analysts following the release of earnings.
Intel never wavered in its technology roadmap, introducing new 32 nanometer designs at the CES show this past January.
The first quarter is typically a down quarter following the Christmas rush, but Intel defied that trend with the January release of 17 new processors, most of them mobile.
Otellini told analysts on the call that Intel’s mobile business set a company record for mobile revenue due to strong demand, and that he sees corporate demand improving.
“This was the first quarter where we were seeing some real signs of PC sales picking up again.
Some of the sales are the new Arrandale [the new mobile processors] but there were also sales of older SKUs as well.
The average fleet of notebooks is four years old and the average fleet of desktops is five years old. To me, that suggests as CIOs are feeling better about their business, it makes sense to swap these [old systems] out,” Otelini said.
The PC Client Group revenue was flat compared to the fourth quarter of 2009 but up 44 percent over the same quarter last year — when the economic collapse began weighing on sales.
Intel attributed its ability to maintain a steady level with Q4 to record mobile processor revenue and a slight uptick in average selling prices (ASPs) from the new processors.
The Data Center Group saw revenue fall 8 percent sequentially but rose 48 percent year-over-year, while revenue for the Other Intel Architecture group (mostly consisting of Itanium processors) was down 9 percent. Atom revenue fell 19 percent.
Intel now has 50 products on the 32 nanometer design, its fastest ramp to a new process technology ever, and is accelerating the migration of two more factories to 32nm.
At the same time, Intel began sampling its next generation chip architecture, codenamed “Sandy Bridge,” in the first quarter.
It’s being tested by partners now, with volume production expected later this year and a formal rollout by year-end.
CFO Stacy Smith noted Intel is now sitting on $16.3 billion in cash and investments, $2.4 billion higher than last quarter, and that’s after paying $900 million in dividends and another $900 million in capital investments.
For the second quarter, Intel projects revenue in the range of $10.2 billion, plus or minus $400 million.
Margin will be around 64 percent, plus or minus a few points. Intel is expected to post a one-time gain from the sale of its NOR flash memory business to Numonyx, the joint venture it began with STMicroelectronics in 2008 to spin off its flash business.