Intel raises revenue estimates

The Santa Clara, Calif.-based chipmaker said revenue for its fiscal fourth quarter should come in between $9.3 billion and $9.5 billion, substantially higher than the previous estimate of between $8.6 billion and $9.2 billion given in October.

"Basically, it is stronger demand across the board than we expected and server and mobile parts will probably hit records," CFO Andy Bryant said in a conference call with analysts and investors. Bryant added that fourth quarter revenues jumped 11 percent over third-quarter revenues, higher than the 8 percent average over the past five years.

The increase in revenue will likely be greeted warmly by investors, who have boosted the stock to $24.27 from $22.71 in after-hours trading. The company's revenue did not grow as much as initially expected in the third quarter, and profits were slightly lower. At the same time, rival Advanced Micro Devices has been making slight gains in market share for PC processors.

Intel's surge in revenue is a sign that PC sales are moving fairly briskly. The company commands about 85 percent of the market share for PC processors. The sales were not stimulated by unusual or steeper-than-normal price cuts. Despite having to cancel or delay several projects this year, Intel will experience double-digit growth in revenue for the second straight year.

Intel also made progress in reducing a bubble of excess inventory, the result of a price cut in August that failed to stimulate PC sales back then. The company said it "expects a net inventory decrease of several hundred million dollars" for the quarter.

The inventory bubble also prompted Intel to slow production, a decision that's now being reversed. "I am ramping my factories a little faster than expected," Bryant said.

Intel attributed the gains to "strong worldwide demand" of products from the Intel Architecture Group, which makes microprocessors, chipsets and motherboards.

Separately, however, the company has made gains in flash memory. In the third quarter, Intel moved from fourth to second place in this market, while rival AMD lost a substantial amount of market share.

Intel also slightly tweaked its expectations for its gross margin, or the amount of revenue left after operating expenses, although the new estimate is nearly the same. The company said gross margin would come in between 55 percent and 57 percent. Previously, Intel said it would be 56 percent, give or take a few points.

Bryant did not comment much on sales expectations for next year, but said that Intel will likely have to spend more on capital equipment because of a transistion to 65-nanometer manufacturing, which will begin in 2005. On the other hand, the elimination of the excess inventory will help improve margins.

Additionally, the American Jobs Creation Act of 2004 could allow around $6 billion of earnings generated by Intel's overseas subsidiaries to come to the United States and be taxed at the low 5.25 percent rate dictated by the law. "The company is reviewing the matter and does not yet have formal plans regarding the repatriation," Intel said.