Intel defies weak IT market to hit targets

Intel reported first-quarter earnings yesterday that matched analysts' predictions, but its net income has been affected by weak...

Intel reported first-quarter earnings yesterday that matched analysts' predictions, but its net income has been affected by weak spending on IT products in both Europe and the US.

Excluding acquisition-related costs, the chip maker reported net income of $1bn (£695m) for the three months to 31 March, down 7% from a year ago. Earnings for the period, also excluding acquisition-related costs, were down 6% year on year, Intel said in a statement.

Revenue was $6.78bn (£4.69bn), up slightly from $6.68bn (£4.62bn) in the same period last year.

While demand in emerging markets remains solid, established markets such as the US and Europe continue to be affected by weak IT spending, said Craig Barrett, Intel's chief executive officer.

Investments in research and development and manufacturing helped sustain Intel's profits in a "generally soft environment", he added.

Overall, Intel's microprocessor business performed better than expected, with average selling prices buoyed by strong sales of Intel's higher-end Pentium 4 chips. Demand for networking and communication products, including flash memory chips that are widely used in cellular phones, was down from a year earlier, said Andy Bryant, Intel chief financial and enterprise services officer.

Microsoft's Xbox game console gave the chip maker a slight boost, lifting the number of microprocessors it sold above fourth-quarter levels.

"Without Xbox, the volume would have been down a little bit from Q4, but [still] better than we expected," Paul Otellini, Intel president and chief operating officer, said.

This quarter, the company will start selling a new chip set for the Pentium 4, called the 845G, which includes integrated graphics and USB 2.0 capabilities that are intended to boost performance, Otellini said. The chip set will be offered at various levels of pricing and performance, he added.

Intel remains confident that it can hit 3GHz with its Pentium 4 processor by the end of the year, he added. Its fastest Pentium 4 today runs at 2.4 GHz.

For lower cost systems, Intel will start selling Celeron processors this quarter that use its NetBurst architecture, Otellini said. The technology "tweaks" the workings of a chip to boost performance, and at present it is offered only with more expensive, higher end chips.

For notebook users, Intel plans to release faster mobile Pentium 4 processors later this month, Otellini said. And for server customers, the second generation of Intel's 64-bit processor, called McKinley, is still expected to ship in volume in the first half of the year, he said.

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