Intel Corp. (Nasdaq: INTC) on Tuesday announced stronger than expected third quarter results with sales and profits exceeding analysts' consensus estimates on record sales of microprocessors.
The company's solid financial performance helped to, at least temporarily, dispel fears in the electronics industry that tablet PCs and smartphones were rapidly encroaching into and eroding sales of notebook computers and desktop PCs, a concern that had grown rapidly in recent quarters as companies like Apple Inc.
(Nasdaq: AAPL) and suppliers of Google
(Nasdaq: GOOG) Android OS devices gained a large following with consumers.
There are other significant takeaways from the results posted by Intel, the biggest global semiconductor company by revenue, but first, here are details of the third quarter performance: Revenue increased 28 percent from the year-ago quarter to $14.2 billion from $11.1 billion and 9 percent on a sequential basis, and net income rose 17 percent from the prior quarter and the year-ago period to $3.5 billion, or 65 cents per share. By market segments, Intel reported a 22 percent increase in PC client group sales, a 15 percent jump in datacenter sales, and contributions of more than $1 billion from McAfee and Intel mobile communications.
"We grew business by 28 percent, adding more than $3 billion in quarterly revenue year-on-year," said Paul Otellini, Intel president and CEO during a conference call with analysts. "The midpoint of our outlook for the [fourth] quarter puts us on pace to deliver nearly $55 billion in revenue for 2011, after crossing $40 billion for the first time in 2010, representing a year-over-year increase of 26 percent or more than $11 billion."
At least for now, Intel has laid to rest concerns from the investment community that its inability to emerge as a major player in the consumer electronics market, especially in smartphones and tablet PCs, could severely hurt its sales growth and overall prospects in coming years. With notebook shipment continuing to rise, it's obvious PCs will for now continue to co-exist with tablets and other smaller-form computing devices rather than fade away as demand soar for competing products. Also, even as businesses adapt tablets for various mobile functions, they are also increasing investments in notebooks and even client PCs, a relief to Intel and rivals in the microprocessor market.
Investors agreed the company is in much better shape than they were expecting and drove up its stock price more than 4 percent in early trading on Wednesday. Analysts were also bullish on the company with many of them jacking up their forecasts for the company. One analyst, Ashok Kumar of Rodman & Renshaw LLC., told Bloomberg News the company did "admirably well." I concur.
In a follow-up blog, I will be reviewing additional takeaways from the company's results.