San Jose — — Intel Corp. on Tuesday said it swung to a second-quarter profit as sales jumped 34%, blowing past Wall Street's estimates thanks to a continued rebound in the market for personal computers and big computer servers.
"Strong demand from corporate customers for our most advanced microprocessors helped Intel achieve the best quarter in the company's 42-year history," Chief Executive Paul Otellini said in a statement.
The Santa Clara, Calif, chip maker's results suggest a broader tech rebound will continue in the second half of this year. Intel's products serve as the brains in a variety of home PCs and industrial-strength computers sold by other companies, and its earnings are widely viewed as a barometer for the industry.
Intel reported a second-quarter profit of $2.9 billion, or 51 cents a share, compared with a loss of $398 million, or 7 cents, a year earlier. Revenue was $10.8 billion, up from $8.02 billion.
Analysts had expected Intel to report earnings of 43 cents a share on revenue of $10.25 billion, according to a consensus survey by Thomson Reuters.
The results were a big change from the same period last year, when Intel reported its first quarterly loss in more than 22 years, largely because of a $1.45-billion fine assessed by European regulators who found the company used illegal rebates and other tactics to stifle competition.
Since then, however, Intel has been working to put its antitrust troubles behind it, while reporting a big resurgence in sales in recent quarters. Otellini has told analysts he believes Intel can increase its sales and profit on average by at least 10% over the next few years, in part by developing new processors for use in a variety of "smart" gadgets and appliances that are not part of the traditional PC market.
Analysts have been concerned that Intel's core PC business may be threatened by the growing popularity of smart phones and tablets, such as Apple's iPad, which primarily run on lower-cost ARM chips made by competing manufacturers. Intel has responded by developing its own processor, code-named Moorestown, which is designed for similar uses.
"The new product will be popular in tablet computers and will allow Intel to dip its toe into the smart-phone market," chip industry analyst Linley Gwennap wrote in a report last month after the Moorestown chip was unveiled.
Other analysts have been skeptical. "We question whether Intel's efforts will work," said FBR Capital Markets analyst Craig Berger, in a recent note to his clients, "and we note that Intel has a long track record of poor performance in penetrating new markets outside of the PC market."
But despite some analysts' concerns about continued turbulence in the world economy, Berger also said his research shows strong demand for PCs will continue through the year, with many corporations deciding to go forward with new hardware purchases they had put off during the recession. That trend is good for Intel's core business.
Bailey writes for the San Jose Mercury News/McClatchy.