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Intel off to good start in 2005

In sign of better-than-average quarter, Intel narrows its first-quarter revenue estimate to the high end of previous range.

Intel has signaled a better-than-average start for 2005 by raising its revenue estimate for the first quarter.

In its traditional midquarter update statement, the chipmaker on Thursday said its first-quarter revenue is expected to range from $9.2 billion to $9.4 billion. In January, Intel forecast that revenue for the quarter would be between $8.8 billion and $9.4 billion.

Financial analysts generally use the midpoint of Intel's predicted range to set their revenue expectations for the company. Thus, Thursday moved the midpoint of Intel's revenue guidance from $9.1 billion to $9.3 billion. Before the update, financial analysts had expected Intel to report revenue of $9.15 billion for the quarter, based on a survey of 31 analysts by Thomson First Call.

The change shows that Intel is expecting a better-than-average first quarter. Normally, Intel's first-quarter revenue is about 5 percent lower than its fourth-quarter revenue, the company has said. PC sales, especially to consumers, tend to cool off after the fourth-quarter holiday season, meaning Intel sells fewer processors, which represent its main source of revenue.

Intel's new forecast represents a sequential revenue decline of between 2 percent and 4 percent from the fourth quarter, but a year-over-year increase of between 14 percent and 16 percent. Still, if Intel were to hit the $9.3 billion mark, its sales would be only about 3 percent lower in the first quarter than in the fourth quarter, during which it raked in $9.6 billion, besting the typical first-quarter decline of about 5 percent.

The chipmaker also said in a statement that it expects its gross margin percentage for the quarter will be 57 percent, plus or minus a point, versus its previous projection of 55 percent plus or minus a couple of points. The change comes thanks to lower-than-expected costs related to manufacturing chips with its forthcoming 65-nanometer process.

During a conference call to discuss the midquarter update, Intel CFO Andy Bryant said that so far, the chipmaker's first quarter sales have been running slightly better than expected across all of its product lines--including PC processors and flash memory--and in all geographical regions.

"All we can really say at this point is things are a little better than we expected when we started the quarter," Bryant said.

Still, high demand means supplies of Intel's latest mobile chips, including its mobile 915 chipset, will remain tight at least into the next quarter, he said.

"We've been scrambling to meet demand, there's no question," Bryant said, referring to the mobile parts. "Overall demand in the mobile segment is strong. The new products have been successful, and the new products are a little tight."

Intel believes it can meet demand for its newer mobile processors during the first quarter. But meeting demand for its mobile chipsets may take longer, Bryant said.