Intel revenues rise on notebook demand

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Surging demand for notebook computers helped Intel, the world's largest chipmaker, deliver record revenues and a healthy increase in second quarter profits.

The California-based company increased revenues by 15 per cent to $9.2bn in the three months to June. Net income was $2bn, up 16 per cent. Earnings per share were 33 cents, up 22 per cent.

“There is rapid transition to notebook computers, especially in Europe,” said Paul Otellini, chief executive.

Revenues in Intel's Mobility Group comprising notebook processors, mobile phone processors and flash memory chips increased by 50 per cent to $3.2bn. Operating income jumped from $593m to $1.1bn, a 92 per cent increase.

Signalling confidence that demand would remain strong, Intel increased by $300m to $5.9bn its planned capital investment for this year.

“Demand is strong and the factories are full,” said Andy Bryant, chief financial officer.

The money will be used expand manufacturing capacity and invest in new equipment capable of producing next-generation chips with circuit elements measuring only 65nm, down from 90nm. Intel confirmed that it plans to start manufacturing at 65nm before the end of this year.

While the results were broadly in line with Wall Street expectations, Intel stock slipped $1.24 to $24.74 following the announcement, which came after the close in New York.

Analysts noted that strong sales of notebook processors partially offset by weaker than expected revenues in Intel's core business: microprocessors for desktop PCs and computer servers.

Revenue in Intel's Digital Enterprise Group comprising desktop PC and server processors was flat at $6bn. Operating income declined by 7 per cent to $2bn.

Andy Bryant, chief financial officer, blamed the decline on pricing pressure in servers where Intel competes against IBM, Sun Microsystems and Advanced Micro Devices and increased output of chips for Microsoft's Xbox games console. Xbox processors are on average less profitable than computer processors.

Intel dominates the PC processor industry with market share of about 80 per cent. It's only significant rival is AMD, with share of about 20 per cent.

AMD last month filed an anti-trust compliant in federal court in Delaware claiming that Intel had abused its dominant market position by discouraging PC makers from buying AMD chips. European Union officials last week raided Intel offices in a number of countries as part of a seperate anti-trust investigation.

“Intel competes agressively and fairly,” said Mr Otellini. “This formula will not change.”

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