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Intel Boosts Sales Target

The chip maker says demand is strong in the quarter. It has resolved some supply problems, one analyst says.

June 10, 2005|Terril Yue Jones | Times Staff Writer

Intel Corp., the world's biggest manufacturer of computer chips, Thursday raised its expectation for second-quarter revenue, primarily driven by strong sales of laptop computers.

Revenue probably will be $9.1 billion to $9.3 billion, up from the $8.6 billion to $9.2 billion that Intel projected in April, Chief Financial Officer Andy Bryant said.

"Demand feels pretty good right now," Bryant said in a conference call with financial analysts.

Gross margin, or the percentage of sales left after subtracting production costs, will be 57% plus or minus a percentage point, up from 56% plus or minus a couple of points, Bryant said.

"Notebooks are hot," said Shane Rau, a semiconductor analyst at technology market researcher IDC. "The end demand is there, and Intel's supply of its new mobile silicon is there."

There were some supply problems late last year and early this year with Intel's Pentium M chip and new chipsets for notebooks, Rau noted. "But now they're worked out, so we're seeing new notebooks getting to the market," he said.

A decline in pricing for memory, especially the faster memory known as DDR2, is fueling sales, Rau said.

Intel shares, which had gained 60 cents to $27.70 in regular trading, lost 43 cents after hours as the outlook did not live up to investors' hopes for even higher guidance.

Intel narrowed in on the upper range of analysts' expectations but did not surpass them. Analysts surveyed by Thomson First Call had estimated Intel's second-quarter revenue at $8.6 billion to $9.3 billion.

Intel's forecast came three days after Apple Computer Inc. said it would switch from microprocessors made by IBM Corp. and Motorola Inc. to chips made by Intel. Although not large in terms of market share -- Apple has less than 3% of the U.S. personal computer market -- the switch was a psychological boost for Santa Clara, Calif.-based Intel, which has more than 80% of the world's PC processor market.

On Wednesday, the Semiconductor Industry Assn. revised its forecast of 2005 chip sales to a 6% increase to a record $226 billion, instead of essentially flat sales of about $213 billion projected in November.

"Worldwide sales of semiconductors have been stronger than expected through the first quarter of 2005," the group's president, George Scalise, said in a statement. "Higher sales have been driven by better-than-expected demand in a number of important end markets, including personal computers and wireless handsets."

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