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Intel earnings better than expected, though Q3 looks iffy

Intel said growth will be slower in the third quarter due to a weak economy, but was hopeful that ultrabook sales would boost growth going forward.

Intel reported better-than-expected second quarter results, but cut its outlook for the third quarter due to what it described as "a more challenging macroeconomic environment."

The company remained hopeful that new ultrabooks and smartphones would boost growth in the second half.

Specifically, Intel delivered second quarter earnings of $2.8 billion, or 54 cents a share, on revenue of $13.5 billion. Wall Street was expecting earnings of 52 cents a share on revenue of $13.56 billion.

As for the outlook, Intel projected third quarter revenue of $14.3 billion, give or take $500 million. Wall Street was looking for revenue of $14.6 billion for the third quarter. For 2012, Intel said revenue growth will be about 3 percent to 5 percent from 2011. The chip giant had expected revenue growth in the high single digits.

In a statement, Intel CEO Paul Otellini said:

As we enter the third quarter, our growth will be slower than we anticipated due to a more challenging macroeconomic environment. With a rich mix of Ultrabook and Intel-based tablet and phone introductions in the second half, combined with the long-term investments we're making in our product and manufacturing areas, we are well positioned for this year and beyond.

Analysts have questioned Intel's assumptions given PC demand has been lackluster. If Intel can't become a leading tablet player its growth may be hampered.

For now, Intel's data center group is a strong performer. PC revenue, however, remains solid.

By the numbers:

  • PC client unit volumes were up 7 percent in the second quarter, but average selling prices fell 2 percent.
  • Data center volumes were up 4 percent in the second quarter compared to a year ago and average selling prices jumped 12 percent.
  • Intel's PC unit delivered second quarter operating income of $3.42 billion on revenue of $8.68 billion.
  • The data center group had second quarter operating income of $1.39 billion on revenue of $2.8 billion.
  • Intel's software unit had second quarter operating income of $14 million on revenue of $586 million.
  • The company ended the quarter with 102,800 employees.
  • Asia Pacific revenue was 58 percent of sales with Americas accounting for 21 percent. Europe revenue was 12 percent of sales and Japan was 9 percent.
  • Intel expects to spend $18.2 billion in 2012 on research in development and general and administrative expenses.

This item first appeared on ZDNet's Between the Lines blog under the headline "Intel cuts third quarter outlook, cites challenging economy."