Upbeat Intel sales lead road to recovery

Upbeat Intel sales lead road to recovery

Revenue and profit is down, but ahead of analysts' expectations.

A brighter than expected outlook from Intel, the world's largest maker of computer chips, has fuelled hopes that personal computer manufacturers can avoid an annual sales dip for the first time since the dotcom crash of 2001. Research firm Gartner was predicting a drop of almost 12 per cent in unit sales back in March, after consumer and business demand ground to a halt in the wake of the global financial crisis.

But that gap has closed gradually during the past six months - Gartner revised its numbers for the second time this year in September to predict annual shipments would be down by just 2 per cent to 285 million units - and market sentiment will be further bolstered by Intel's latest quarterly results.

Last month, Intel chief executive Paul Otellini said PC sales could defy gloomy predictions by achieving growth in 2009 and avoiding the first slump in eight years.

Intel, which is widely regarded as a bellwether for the information technology industry and the broader economy, yesterday posted annual revenue of $US9.4 billion ($10.4 billion) for the three months to September 30, down 8 per cent on the previous year but well above analysts' expectations.

Net profit was also down about 8 per cent for the period at $US1.9 billion.

But despite the revenue and profit dip, Intel shares jumped almost 5 per cent in extended trading to $US21.48 after the company surprised the market by forecasting fourth quarter sales of about $US10.1 billion, compared to analyst consensus of $US9.5 billion.

Intel's chief financial officer Stacy Smith said consumers were doing most of the spending and predicted business investment in new personal computers was unlikely to rebound until next year.

Traditionally, the consumer market is strongest in the fourth quarter so the imminent arrival of Microsoft's Windows 7 operating system, and a rebounding consumer confidence just in time for the Christmas sales rush, provides PC makers such as Hewlett-Packard and Dell with the best opportunity to post sales growth by year's end.

Local research released by market analysts at IDC in August estimated annual Australian PC sales would be worth $7.75 billion in 2009, up 4 per cent from a year earlier. At the end of last year it was predicting a 1.3 per cent drop in revenue for the period.

"The exchange rate was hammering the Australian dollar earlier in the year, which forced hardware pricing upwards," IDC analyst Neville Chan said. "But despite the price increases, demand from consumers was still quite buoyant.

"We saw some of the economic stimulus in the first half of the year flowing into the PC hardware space."

Intel is the first of the major information technology companies to report third quarter financial results this week. Results for IBM and Google are expected on Friday.

Key points

  • Intel revenue and profit is down, but ahead of analysts' expectations.
  • PC sales could grow in 2009, avoiding a first slump in eight years.

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Tags mobilityGartnerintelIDCPCsvendor managementanalyst

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