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Intel profit doubles, revenue up 22%

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CIOL Bureau
New Update

By Daniel Sorid

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SAN FRANCISCO: Intel Corp., reported a doubling of quarterly profit and its highest-ever quarterly revenue, as technology spending in North America and Europe showed signs of a revival.

After a year that executives said started with a question mark and ended with an exclamation point, Intel predicted a return to normal seasonal patterns with a decline in revenue in the current quarter from the fourth quarter.

Investors, however, sent shares of Intel down 3 percent following the close of regular trading, as Wall Street apparently had hoped for stronger sales ahead. The stock, which was the best performer on the Dow Jones Industrial Average last year, remains close to a 52-week high.

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"I think it's the guidance," Stephen Massocca, president of San Francisco-based investment bank Pacific Growth Equities, said of the after-hours stock drop. "I think it's probably a little bit more conservative than people expected."



Intel's efforts to sell chips into cellular phones and networking equipment have yet to catch on. Despite bringing in $1 billion in sales, Intel's communications business lost $146 million in the quarter.

A recovery in Intel's primary business segment -- personal and business computers -- more than outweighed that weakness. Intel's microprocessor business reported a $3.73 billion operating profit, 87 percent higher than the year-ago quarter.

Intel executives attributed the improvement in profitability in part to stronger sales of processors for computer servers, the powerful computers that businesses use to run Web sites and databases. Those chips sell at higher prices and give Intel better profit margins.

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SURPRISING STRENGTH IN DEVELOPING WORLD

In an interview, Chief Financial Officer Andy Bryant said the company has seen early indicators of a return to stronger spending on computers and other technology by corporations, which have been the most uncertain element in the fledgling technology recovery.

"What we saw in the fourth quarter was surprising strength, both in North America and Western European geographies, which we assume is an early indicator of an increase in I.T. spending," Bryant said.

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Intel, which is the largest buyer of machinery used to produce microchips, said its capital spending plan this year would stay about even with last year. Those investments are intended to give Intel five factories that produce chips on 300-millimeter wafers, which yield more than twice the number of microchips as standard-sized wafers.

Job growth does not appear to be on the Santa Clara, California, company's immediate horizon. Bryant, the CFO, said he was waiting to see overall strength in the first-half of the year before adding jobs.

RECORD REVENUE, BUT A BIG CHARGE

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Intel reported net income in the fourth quarter ended Dec. 27 of $2.17 billion, or 33 cents a share. That figure included two offsetting special items -- a $611 million impairment charge related to an acquisition of a communications company, and a $620 million gain from tax benefits related to divestitures.

About 6 cents of the gains were previously undisclosed by the company. Wall Street analysts were anticipating earnings in a range of 23 cent to 28 cents a share, according to Reuters Research.

Revenue in the quarter rose 22 percent to $8.74 billion, barely topping an previous all-time high reached in 2000.



Intel forecast first-quarter revenue in the range of $7.9 billion to $8.5 billion, within the range of analyst estimates. The company also said it expected its gross margin to reach 60 percent, plus or minus a few points.

In the prior-year period, the company reported earnings of 16 cents a share on net revenue of $7.16 billion.

© Reuters.

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