Intel profit surges 12%

Intel profit surges 12%

The computer-chip maker beats earnings expectations in 3Q, but slips in sales - the company says their outlook is clouded by the current financial crisis.

SAN JOSE, Calif. (AP) -- Intel Corp.'s third-quarter profit rose 12%, edging past Wall Street's estimates, but the chip maker cautioned that the pall the financial crisis has cast over the technology sector makes it hard to predict its results for the current period.

The company reported after the market closed Tuesday that its profit for the three months ended Sept. 27 was $2.01 billion, or 35 cents per share. That compares with the $1.79 billion, or 30 cents per share, from the year-ago period.

Analysts surveyed by Thomson Reuters expected 34 cents per share in profit.

Sales were $10.22 billion, just a 1% increase over last year, but Intel said the figure was a record for the third quarter. Analysts expected $10.26 billion.

The Santa Clara-based company, the world's No. 1 maker of PC microprocessors, said that it still expects healthy and relatively unchanged profit margins for the October-December quarter. Sales for that period could fall below the range of estimates offered by Wall Street analysts, however.

Stacy Smith, Intel's chief financial officer, said because of the economic turbulence, Intel plans to update investors in early December, ahead of the formal fourth-quarter report, about the company's finances.

"We have a high degree of uncertainty around demand in the fourth quarter, but our execution is good," he said in an interview.

Because Intel's processors are used in around 80% of the world's PCs and servers built with PC chips, its financial results are seen as a valuable gauge of the health of the broader technology sector.

A big reason Intel is able to wring out more profits despite only incrementally higher sales is because it's getting cheaper for the company to make each of its chips. Technological advances allow the company to squeeze more transistors onto the same slice of silicon while lowering the expense of making those chips.

Intel's most advanced chips are currently built with parts whose average width is only 45 nanometers, or 45 billionths of a meter.

Those advances help Intel increase its profit margins even in tough times. The company's gross profit margin - the amount of money it makes on each dollar of revenue once manufacturing costs are stripped out - rose 3.5 percentage points from 55.4% in the second quarter to 58.9% in the third quarter.

Intel attributes the increase to lower manufacturing costs and higher revenues.

Intel Chief Executive Paul Otellini warned in a statement that it's "hard to know" what impact the financial crisis will have on demand for Intel's chips in the fourth quarter. Still, Otellini said he expects Intel to "outpace peer companies" during the period because of its sales momentum and strong products and balance sheet.

Intel predicted a gross profit margin of 59% of revenues, plus or minus a couple of percentage points in the fourth quarter.

Sales, however, could come in below the range of estimates offered by Wall Street analysts. Intel expects sales of between $10.1 billion and $10.9 billion. Analysts were expecting sales in the range of $10.4 billion and $11.3 billion.

Intel (INTC, Fortune 500) shares, which lost $1.06, or 6.2%, to close at $15.93 during the regular session, regained some of the lost ground in after-hours trading, adding $1.05, or 6.6%, to $16.98.

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