The Santa Clara, Calif.-based chipmaker's net earnings for the quarter, which ended June 28, were $896 million, or 14 cents per share, on revenue of $6.8 billion. That compares with earnings of $446 million, or 7 cents per share, on revenue of $6.3 billion in the same period a year ago.
Analysts had expected Intel to earn a profit of 13 cents a share on revenue of $6.7 billion, according to a survey by earnings tracking firm First Call.
"Q2 was slightly better than expected and substantially better than a year ago," said Paul Otellini, Intel's president, during a conference call to discuss the company's results. "While the markets for our communications products are still lagging, our Intel Architecture business is performing better than expectations."
Observing that Intel's financial results have come in at the high end of its traditional revenue ranges for three quarters in a row, Intel CFO Andy Bryant said the company believes it is getting back to a normal pattern, following several quarters of abnormal contraction and growth during 2001 and 2002.
The company's Intel Architecture Business Group, or PC chip business, booked revenue of $5.8 billion during the quarter, up slightly from a year ago. Processor shipments and average prices were about the same as in the first quarter, Intel said.
The quarterly results included the company's best performance to date in the Asia-Pacific region and the shipment of 1 million Pentium M processors. The Pentium M is Intel's newest mobile processor and the core of its Centrino family of chips for wireless notebooks. Intel also believes that it gained share in chipsets and motherboards, Otellini said.
While the Intel Architecture business fared better than expected, the company's communications products groups continued to suffer during the second quarter. Intel's Communications Group and Wireless Communications and Computing Group, which sell networking and wireless chips, respectively, both saw revenues decline on a year-over-year basis. Flash memory revenues, in one example, declined during the quarter.
Intel sees signs of better prospects ahead. Its outlook for the third quarter is for revenue to come in between $6.9 billion and $7.5 billion, marking a sequential increase, while gross margins should also improve. Typically, revenue for Intel increases from the second to the third quarter.
During the past five years, Intel has seen its revenue increase by an average of 7 percent between the second and third quarters, Bryant said.
If Intel's 2003 third-quarter revenue hits the midpoint of its forecast, $7.2 billion, the company would enjoy a sequential gain of six percent, Bryant said.
Intel also expects to see a tax benefit from an unnamed divestiture it will make this quarter.
Signaling that the chipmaker believes times are getting better, the company will resume a program to give its employees home PCs. Intel put the program on hold during 2001 after doling out PCs to only half of its employees. It will now make good on its promise to the rest of its employees, Bryant said.
Despite expecting solid processor sales and seeing some potential for an increase in sales of flash memory, Intel executives are still reluctant to declare that an economic or PC market recovery is afoot.
"We're not seeing signs of an economic recovery," Bryant said. "We're not seeing signs of a big upgrade cycle or big increases in IT spending."