Intel Corp's orders and billing patterns so far in the second quarter have been slightly better than expected, the chief executive of the world's largest chip maker said.
Paul Otellini told investors second-quarter sales depend on how they fare in June but “so far, so good” - in remarks that sent Intel's shares up as much as 4% in extended trading.
“We are halfway through Q2,” he said. “In terms of our order pattern and our billing pattern, it's a little better than expected.”
Intel, which controls 80% of the microprocessor market, is seen as a bellwether for the personal computer and technology industry. But it has struggled in the economic downturn, shutting plants and trimming 1,400 jobs since the fourth quarter.
Intel executives also said on Tuesday gross profit margins should return to "normal" levels, which it defined as between 50% and 60%, in the next several quarters.
Margins for the Atom chips used in a new generation of low-priced netbook computers, will be above 50% in the fourth quarter of 2009, the company said.
In the first quarter, Intel's overall gross margin dipped to 45.6%, from 53.1% in the fourth quarter, and investors have been worried the popularity of low-cost Atom-based notebooks could squeeze the company's profit margins.
Doug Freedman, an analyst with Broadpoint AmTech, said the details on margin expectations were a relief to investors.
Otellini would not comment on the pending European Union antitrust investigation, which is expected to issue a ruling against Intel on Wednesday.
“On the EU rumors, they're just that, rumors,” Otellini said in response to a question.
“When they are anything but a rumor, I can assure you we will comment.”
Last month, Otellini said the worst was over for the battered tech sector as Intel reported its first-quarter earnings, but its shares slid as executives said economic uncertainty prevented them from giving a detailed outlook.
Otellini said on Tuesday Intel should end the year with around 78,000 employees, down about 25% from a peak of 103,000 in 2006.
Intel has said it expects second-quarter revenue to be flat with the $7.1 billion reported in the first quarter. But some analysts said the outlook was conservative, and Reuters Estimates showed analysts expecting a slight increase in each quarter for a year-end total of $30.3 billion.
But that would still be more than $7 billion less than last year's revenue, with earnings per share seen falling more than 40% to 53 cents a share, according to Reuters Estimates.
Shares in the Santa Clara, California-based Intel rose to $15.64 in extended trading, up 2.8% from their Nasdaq close of $15.21.
Analysts say Intel's biggest concern is filling its factories. About 6%age points of the gross margin drop that Intel experienced in the first quarter came from factory under-utilization charges, Intel has said.
But research from iSuppli last week showed demand for portable phones and computers may cause factories to run closer to capacity. Chip plants, which ran at less than half their capacity in the first quarter of 2009, should operate at three-quarter capacity by the fourth quarter, iSuppli said.
Intel's finance chief said on Tuesday factory utilization hit an all-time low of 40% in the first quarter, but should return to normal levels in the second half of the year.
Intel said corporate demand for PCs remains weak, but consumer demand is holding up, and executives said they expected a “seasonal” second half of the year.
Sales chief Sean Maloney said a new generation of processors designed for ultra-thin notebook PCs, and the upcoming release of the Microsoft Corp Windows 7 operating system, would boost demand for new PCs.
Intel did not talk much about its forthcoming graphics chip, dubbed Larabee, though Otellini said the product will “not ship for sale to an end user this year.” (Reuters)