Intel bests earnings estimates

Intel today leapt past Wall Street estimates for its third-quarter earnings, driven by a healthy pace for worldwide PC sales.

In looking at the coming fourth quarter, several analysts remain bullish on the company.

Intel executives said they expect fourth-quarter revenue to rise slightly above those posted for the most recent quarter, but some analysts suspect the chip giant may be conservative with its forecast.

"I think they were sandbagging a bit. They exited the quarter with such a huge momentum trend line that I think their estimate was conservative," said Charles Boucher, an analyst with Donaldson, Lufkin & Jenrette.

He added that analysts likely will be raising their Intel earnings estimates tomorrow, giving some bounce to the stock.

"Intel's stock has not been trading at a valuation that reflects its growth level," he said.

David Wu, an analyst with ABN AMRO said computer makers that purchase Intel's chips continue to report that their distribution channels are pretty lean--hence demand for chips will likely continue. He said the market would not be flooded as a result.

Indeed.

"The biggest challenge we're facing as this quarter begins is being able to produce enough parts to meet our customers needs," Intel chief financial officer Andy Bryant said in a conference call.

The chip giant's revenues reached a record $6.7 billion for the quarter, a 9 percent increase over year-ago figures. Last month, Intel announced that its revised revenue outlook for the third quarter would be 8 to 10 percent higher sequentially, compared with its previous predication that numbers would remain flat.

Intel isn't the only one riding the wave of strong PC sales. Advanced Micro Devices also reported better than expected third quarter results and record revenues earlier this month.

Intel posted net profits of $1.6 billion, or 89 cents a share, for the quarter, basically the same as figures of a year ago. Analysts had expected the chipmaker to post earnings of 80 cents a share, according to First Call.

"We are pleased with our overall performance in the last quarter," said Craig R. Barrett, president and chief executive officer, in a statement. "We had growth across nearly all of our geographies and product lines, including strong microprocessor sales. In the third quarter, the PC industry recovered from its inventory problems and is benefiting from strong seasonal demand."

Unit shipments of microprocessor, chipset, motherboard, flash memory and Fast Ethernet connections, hubs and switches were up in the third quarter compared with the previous quarter. But shipments of embedded processor and microcontroller units were down sequentially.

Intel executives said sales of its new Pentium II Xeon processors were strong, as were sales of its Celeron processors 333 MHz and 300 MHz.

While some analysts expected Intel to perform even better than last month's upwardly revised estimates, Intel managed to blow past even the highest estimates. Ashok Kumar, an analyst with Piper Jaffray, had pegged earnings at 84 cents per share prior to the earnings release today.

Intel is an investor in CNET: The Computer Network, publisher of News.com.