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Intel revenue up 5 percent

The traditional third-quarter bump is light for the chipmaker, as lower-than-expected PC sales offset flash memory gains.

The traditional third-quarter bump was a little light this year for Intel.

The Santa Clara, Calif.-based chipmaker on Tuesday said it earned $1.9 billion, or 30 cents per share, on sales of $8.5 billion for the quarter that ended Sept. 25. Those figures included a tax benefit of 3.6 cents per share.

Revenue came in slightly higher than the expected $8.45 billion, but earnings were slightly lower. Analysts expected earnings per share of 27 cents, an estimate that excluded the tax benefit.

While the company saw record shipments in server and notebook processors and market share increases in flash memory, lower-than-expected PC sales offset those gains, according to the company.

Revenue rose 5 percent from the $8 billion figure in the second quarter, while net income rose 8 percent, including the tax benefit, from $1.8 billion. Typically, Intel sees a rise of about 6 percent to 12 percent in sales from the second to third quarter. Still, the third-quarter figures bested those from last year. Then, Intel reported $7.8 billion in revenue and $1.7 billion in net income, or 25 cents in earnings per share.

"We had a more robust view of the second half in the last conference call," said Intel President Paul Otellini, adding that one of the more notable soft markets was U.S. retail.

For the fourth quarter, Intel said revenue should come in between $8.6 billion and $9.2 billion, which earlier in the year was the expectation for the typically weaker third quarter. Gross margins for the fourth quarter should come in at 56 percent.

In September, Intel said it expected to post revenue of between $8.3 billion and $8.6 billion for the three-month period, with a midpoint at $8.45 billion.

Although worldwide PC shipments are still expected to grow by more than 10 percent this year, some of the momentum from earlier in the year has slowed, which has affected Intel.

In July, the company predicted that it would garner between $8.6 billion and $9.2 billion, leaving the midpoint at $8.9 billion, for the September quarter.

The shortfall came as a result of lower-than-expected sales after an August price cut. Intel Chief Financial Officer Andy Bryant said the chipmaker likely failed to properly account for the processor inventory at PC makers left over from the second quarter.

Rival Advanced Micro Devices also appears to be siphoning off some microprocessor business. The company in October said its profit for the quarter came to $43.8 million largely because of a rise in microprocessor shipments and an increase in the average selling prices of these chips.

Sales of AMD's computation products came to $673 million in the third quarter of 2004, a 34 percent increase from the same period a year ago, when revenue for the division came to $503 million.

On the other hand, AMD saw flash memory revenue and operating profit decline sequentially, particularly in handsets. The flash business had been growing, in part because of earlier Intel missteps that the chipmaker had vowed to correct.