AP
Chipmaker Intel Sees Profit Jump 44 Pct.
Tuesday July 17, 6:26 pm ET
By Jordan Robertson, AP Technology Writer
Intel Corp. Sees Second-Quarter Profit Jump 44 Percent Despite Drop in Chip Prices

SAN JOSE, Calif. (AP) -- Intel Corp. said Tuesday its second-quarter profit jumped 44 percent on strong sales of microprocessors even as the company faced fierce competition that pushed prices lower.

After hitting a new 52-week high during regular session trading, Intel's stock fell more than 4 percent in after-hours trading.

The Santa Clara-based chip maker's net income for the three months ended June 30 was $1.28 billion, or 22 cents per share, compared with $885 million, or 15 cents per share during the same period last year.

Were it not for certain one-time tax gains, Intel's profit for the latest quarter would have been lower by 3 cents per share. Analysts surveyed by Thomson Financial were expecting Intel to earn, on average, 19 cents per share.

Intel exceeded analysts' revenue expectations, ringing up $8.68 billion in the second quarter, an 8 percent increase over the $8 billion it reported in the same period last year.

Intel, the world's largest semiconductor company, announced its financial results after the market closed. Before the earnings were released, the company's stock price hit a new 52-week high, closing up 38 cents, or 1.5 percent, at $26.33.

But investors seemed displeased with the company's closely watched gross profit margin, which fell to 46.9 percent of revenues -- at the low end of the company's forecast -- because of lower microprocessor selling prices and weak demand for NOR flash memory chips, which are primarily used in cell phones. Intel is in the process of unloading its troubled NOR flash division.

"It got a little tougher in the second quarter than we expected, but it's pretty consistent with our outlook," Andy Bryant, Intel's chief financial officer, said in an interview with The Associated Press. "We believe our best defense against pricing pressure is more and more product differentiation."

Price-cutting has hurt profits at Intel and its smaller microprocessor rival, Advanced Micro Devices Inc.

However, Intel has been able to withstand the pressure better because of its size -- Intel's $153 billion market value is 18 times as big as Sunnyvale-based AMD's -- and because of its faster transition to a more advanced chip-making process that boosts chip performance while lowering manufacturing costs.

AMD, whose stock price has fallen 19 percent since the start of the year, is scheduled to report its second-quarter results on Thursday.

Intel's shares, which were up 29 percent on the year prior to the earnings announcement, shed $1.16, to $25.17, in after-hours trading Tuesday.