Surprise in Intel 1Q: Corporate PC spending up

SAN FRANCISCO — Intel Corp. executive speak the chip maker's first-quarter results exposed a astonishing and heartening trend: Companies are finally preliminary to upgrade their staff laptops.


That's significant because corporate spending on personal computers has been one of the last parts of the technology world to melt out as companies unlock budgets solid during the recession.

But there's a grasp, according to Intel CEO Paul Otellini: Many companies are trade PCs again because it's simply less luxurious than execution on to older machines that want recurrent maintenance. He said many clients were buying computers with older Intel chips, which are less money-spinning for the company than the newer products.

"I'm still not going to go out on a member, and our clients aren't going to go out on a member, and say there's a corporate revive snapback cycle," he said. "People are buying things to replace older machines because it's just cheaper."

Still, that dynamic was input in helping Intel's net profits almost quadruple in the most recent quarter when compared with last year.

Intel became the first main technology company to report earnings for the first quarter when it said after the market closed Tuesday that it earned $2.4 billion, or 43 cents per share, in the first three months of 2009.

Analysts polled by Thomson Reuters were expecting profit of 38 cents per share.

In the same time last year, Intel earned $629 million, or 11 cents per share. At the time Intel was muddling through the slump, but Otellini predicted that personal computer sales had "bottomed out" — an early predict that proved true.

Intel's revenue in the latest period jumped 44 percent to $10.3 billion, ahead of analysts' forecast for $9.8 billion.

The company also raised its forecast for a key performance measurement. Intel now predicts a gross profit margin of 62 percent to 66 percent of revenue in 2010, up from its previous guidance of 58 percent to 64 percent of revenue.

And Intel said it expects to employ about 1,000 people this year all-inclusive. Intel at present has 79,900 employees, down from 82,500 a year ago.

Intel shares rose 23 cents, 1 percent, to close at $22.77 before the earnings report. In after-hours trading the shares jumped 90 cents, nearly 4 percent, to $23.67.

Intel's consequences might be an early preview of a fit quarter for the technology industry, because many kinds of suppliers would profit if large companies are starting to use up more money on computers and other equipment.

During the most horrible of the recession, the computer industry was propped up by consumer spending, typically on heavily inexpensive computers and "netbooks" — modest laptops used for surfing the Internet. Still, the slump was the PC industries most horrible in nearly a decade.

Late last year, corporations picked up their spending on their essential back-end computers. Sales of computer servers — the behind-the-scenes computers that run Web sites and chomp data for companies — rose at the two biggest server makers, Hewlett-Packard Co. and IBM Corp.

That trend has helped raise Intel and competitor Advanced Micro Devices Inc. because server processors are amongst their most profitable products.