Microprocessor giant Intel announced another blockbuster financial quarter on Wednesday with net income of $3.2 billion on a record $13.1 billion in revenues. It was the fifth straight quarter in which the firm posted record revenues, and it's a reminder that the traditional market for PCs and servers is still firing on all cylinders despite consistent, ill-informed reports to the contrary.
Intel reported double-digit growth in all of its market segments, with revenues in its PC group up 11 percent year over year. (Industry analysts previously claimed that PC sales grew only 2.45 percent in the quarter.) The company generated about $4 billion in cash from operations during the quarter and paid out dividends of $961 million to shareholders.
"We achieved a significant new milestone in the second quarter, surpassing $13 billion in revenue for the first time," said Intel CEO Paul Otellini. "Strong corporate demand for our most advanced technology, the surge of mobile devices and Internet traffic fueling data center growth, and the rapid rise of computing in emerging markets drove record results."
Like Apple, Intel credited stronger-than-expected demand from China, the largest of the emerging markets right now. Corporate demand for both PCs and servers was also strong, Intel said.
Looking ahead, Intel sees nothing but blue skies, and the company offered an unusually positive assessment of the next two quarters. "Intel's increasing confidence in the second half of 2011 positions us to grow annual revenue in the mid-20 percent range," Otellini noted. "Intel is well positioned to grow."
Despite the stronger-than-expected quarter and a rosy outlook, shares in Intel managed to fall in after-hours trading Wednesday. The reason? Intel says it now expects PC growth to hit in the 8 to 10 percent range for 2011, a bit below its previous estimate. And although overall PC revenues were up much higher than expected, revenues in the low-end Atom line of processors fell 15 percent in the quarter as customers moved to more powerful yet still inexpensive PCs. This is evidenced by Intel's double-digit PC revenues growth, refuting the conventional wisdom that says iPads are cutting into PC sales. Thus, it appears that most iPad sales are additive, akin to sales of iPods or smartphones. (Apple sold 9.25 million iPads during the previous quarter, compared with overall PC sales of about 85 million.)
More problematic for Intel, perhaps, is the rise of smartphones—the vast majority of which don't utilize Intel chipsets—and a new generation of Windows that will run on tablets based on the competing ARM platform. But Otellini noted in a post-earnings conference call that the company was well positioned for the future.
"We expect to be hyper-competitive fortablets," he said. "Our job is to make sure that we can out-perform, out-battery, and out-compatibility the ARM guys on Windows 8 tablets."
Microsoft releases its quarterly earnings late today.