Intel profits creep up on back of laptop demand

Intel on Tuesday reported that its third-quarter profits rose five per cent, less than analysts' expectations, as revenue from processors reached an all-time high of $7.26bn.

Net profits for the period were just under $2bn, or 32 cents per share, on overall revenue of $9.96bn. That compares with profits of $1.91bn, or 30 cents per share, on revenue of $8.47bn in the same period in 2004.

Analysts expected Intel to earn 33 cents per share, according to a survey by Thomson First Call.

Third-quarter net revenue and profits per share were influenced by Intel's $300m patent infringement settlement with MicroUnity. Intel said it will charge $140m now and amortise the remaining $160m over the next 10 years.

An increase in taxes of approximately $250m, equivalent to 4 cents per share, related to the decision to repatriate foreign-earned income under the American Jobs Creation Act (Jobs Act), also bit into Intel's profits per share, the company said.

The third-quarter numbers are still in line with Intel's earlier estimates. During its mid-quarter update, the chipmaking giant said it expected its revenue for July, August and September to be in the range of $9.8bn to $10bn.

At the close of regular trading, Intel shares were up 1.11 per cent or 26 cents to $23.72. The profts report was issued after the close of regular trading.

Intel chief financial officer Andy Bryant said the company faced a third-quarter inventory build-up that it expects to sell off in the fourth quarter in anticipation of next year's dual-core processor designs.

The company expects to see its first batch of dual-core mobile processors code-named Yonah later this year, said CEO Paul Otellini. Intel said it will release versions of the low-power processor after the dual-core Yonah launch in January 2006. The chip is expected to power its Viiv-branded consumer electronics devices such as digital video recorders, as well as Centrino-branded notebooks.

Otellini pointed to a boost from processors that power notebooks and highlighted the launch of the company's new dual-core Xeon processors ahead of schedule and the first shipment of chips built on its 65-nanometer process technology.

He said in a statement: "The combination of our 65nm manufacturing network, broad range of new dual-core processors and unique ability to provide platform solutions positions us well for continued growth."

Notebooks have become a significant profit centre for Intel. In the first quarter of this year, notebook chips accounted for 30 per cent of Intel's output. That figure is expected to rise to about 33 per cent next year, Intel has said.

Two analyst firms on Monday increased their forecasts for the PC and server market for the next three months, which bodes well for Intel. IDC boosted its annual forecast for shipment growth to 17.1 per cent, well over the 13.3 per cent growth rate the research firm predicted in August.

Research firm Gartner, meanwhile, expects shipments to grow at 17.2 per cent for the year. Roughly 200 million desktops, notebooks and x86 servers will leave factories this year, according to Gartner.

For its fourth quarter, Intel said it expects revenue to be between $10.2bn and $10.8bn. Gross margin percentage for the next three months is expected to be approximately 63 per cent, plus or minus a couple of points, as compared with 59.7 per cent in the third quarter.

Michael Singer writes for CNET News.com