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Intel Corp has released its financial figures for the July-September quarter posting a 7.8 % decline in profits. Despite sales turning southwards the organization beat the Wall Street’s forecast. That is not the only upside here though, Paul Otellini, Intel CEO has said that its gross profit margins for the final quarter are expected to be 62 percent of revenue, with a possible variation of about three percent in either direction. That translates to sales figures in the range of $9.7 billion to $10.5 billion.
The news was welcomed by the markets and the company’s stock rose more than 4 percent in extended trading. Analysts are treating this as a positive result and with an upward trend being registered in markets everywhere, there is rising hope that the worst of the economic crisis might be over.
The world’s largest semiconductor chip maker, based on revenue, has been hurt because of extremely conservative spending by corporations because of the global slowdown and in an effort to cut costs at their end. Though this trend is expected to continue into next year. The Santa Clara based company hopes that organizations would loosen some purse strings and get back to buying personal computers, whose sales have dwindled in the past few months, resulting in a ripple affect for Intel and thus, affecting their sales in an otherwise standout third quarter.
Despite the bullish forecast for Q4 by Intel Corp, there are rising concerns about how the company hopes to meet those targets. Paul Otellini stated that the server side of the business is looking very good and they expect a good return from it. The area of concern for them however, is the desktop and notebook side, which have taken a beating for quite some time now. Things might start looking better as the company hopes as more and more evaluations and migrations start occurring for Windows 7, the newest OS being rolled out by Microsoft Corp. Also, the Nehalem-based Core “i” series of processors are creating quite some buzz and Intel says that Windows 7 and the Nehalem-based processors are made for each other in terms of the performance and power management and security characteristics. Otellini hoped that when organizations get down to setting their budgets for the next year, things will start to appear in black and white. Another factor that could play into Intel’s favor would be that four or five year old machines cost more to maintain than acquiring new machines.
Another strong card in Intel’s pack is in their netbook segment. The new Atom processor for netbooks is gaining popularity albeit not as much as the resurgence of notebooks in the market, but things look good here too. The main thing from which Intel stands to gain is that the Atom processor is manufactured using the same process that was used for the Pentium M. Hence the cost savings are huge for the company. Atom played a major role in boosting the revenue figures for Intel in the last quarter and that trend is likely to continue. The netbook market is not as big yet and hence the Atom contributes only a small share in the total revenue, however the profit margin from the same is disproportionately high.
Intel is also looking forward to the growth in the notebook sector as newer, thinner and lighter notebooks hit the market over the holiday season. The new category of ultrathin laptops will boast of dual core processors, a change from last quarters bulk of single core models. All this is creating a favorable environment for Intel’s fabrication units which are looking at increased utilization of the facilities thus churning out higher volumes of processors and thus helping to vault the revenues and the companies fortunes in the next quarter.
If Intel crosses the 60 percent gross margin magic figure in the fourth quarter, it will be for the first time since the same period in 2005. The final quarter of the year is a big one for PC and chip makers alike as companies get about implementing their budgets for the next year and thus generating a lot of business in these areas. If Intel Corp will be able to achieve these figures remains to be seen and will heavily depend on the judgment of the various CEOs and CFOs of the economic meltdown and their position relative to it. With signs pointing towards a resurgent market and other similar positive factors across various sectors there might be ‘Intel Inside’ a lot more than ever before.
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