Intel beats estimates, shares jump 5%

World's largest chipmaker reports earnings above Wall Street estimates on strong PC sales.

By Ben Rooney, staff writer

NEW YORK ( -- Intel Corp., citing a strong market for personal computers, reported big increases in third quarter revenue and profit exceeding analysts' projections.

Shares of Intel (Charts, Fortune 500) jumped nearly 5 percent after-hours immediately following the announcement, after closing down slightly at $25.48.

Intel, the world's largest chipmaker, said third-quarter earnings reached $1.9 billion, a 43 percent increase over the same period last year, and earnings per share were 31 cents, up 41 percent from the same period last year.

Analysts surveyed by Thomson First Call had forecast earnings per share of 30 cents.

The company reported revenue of $10.1 billion in the third quarter, a 15 percent increase over the same quarter last year.

Analysts had estimated that revenue would be $9.62 billion.

Intel's third-quarter gross margin was 52.4 percent, up from 46.9 percent in the second quarter.

The company also offered fourth quarter revenue guidance of between $10.5 billion and $11.1 billion, ahead of what analysts were expecting.

The gross margin increase and projected gross margin increase for the fourth quarter were among the most notable aspects of Intel's statement, according to Doug Freedman, an analyst at American Technology Management.

Intel said that it saw record sales of total microprocessor units, although the average selling price was flat. Sales of motherboard units were lower.

"Flat in this environment is a good achievement," said Glen Yeung, an analyst with Citgroup.

Intel Chief Executive Officer Paul Otellini said during a conference call that notebook computers as a group are expanding. "As notebook volumes grow, prices will come down," he said.

The company's chief financial officer, Andy Bryant, said that one of his goals in the next quarter will be to increase inventory.

"Inventory level is lower than I would like given level of demand," Bryant said.

Intel, which has been restructuring and reducing costs, said it will cut 2,000 more positions by the end of the year. The cuts will bring headcount to about 86,000 by the end of 2007, compared to 94,000 in 2006.

Intel also announced Tuesday that Bryant will become chief administrative officer and be succeeded as CFO by Stacy J. Smith, the assistant CFO.

AMD (Charts, Fortune 500), Intel's main competitor, is expected to report a net loss of 62 cents per share, according to analysts surveyed by Thomson First Call, when it announces its earnings on Thursday. Top of page