Intel cements comeback with record Q3 results

By Colleen Taylor, Contributing Editor -- Electronic News, 10/16/2007

In what could turn out to be the semiconductor industry's comeback story of the year, top-ranked chipmaker Intel Corp. today announced record Q3 revenue of $10.1 billion, up 15 percent year-over-year and up 16 percent from Q2.

Even more impressive progress was seen in the company's income levels: the MPU maker’s $2.2 billion operating income for Q3 was a 64 percent increase from Q3 2006 and a 66 percent increase from Q2, while its net income of $1.9 billion was a 43 percent boost year-over-year and a 46 percent boost sequentially.

"A combination of great products, strong and growing worldwide demand, and operational efficiency from our ongoing restructuring efforts led to record third-quarter revenue and a 64 percent year-over-year gain in operating income," Intel's president and CEO Paul Otellini said in a statement. "We are very pleased with the results and optimistic about our business."

Indeed, the strong Q3 report signals a major turnaround from the recent past. In April 2006, the company undertook a broad restructuring program aimed at reversing what had become a trend of lackluster quarterly earnings reports. In connection with that restructuring, in September 2006 Intel began the first of its employee layoffs, which it said would number some 10,500 when completed. In addition to cutting the fat and saving money, Intel became more aggressive with its product releases: In November 2006, Intel made headlines when it debuted its quad-core processor offering nearly a year ahead of its rival Advanced Micro Devices' (AMD)  quad-core launch.

And now, Intel's significant efforts seem to have paid off both in sales and income. The company said that the growth in revenues was primarily driven by the 14 percent Q3 sequential growth in mobility and digital enterprise group processors of 14 percent, with related chipsets and other products up 19 percent.

In addition, Intel said that its total microprocessor units set a record, as did its chipset and flash memory unit sales, in the quarter. The company did not provide specifics on the records by press time.

Intel's gross margin was 52.4 percent, up from 46.9 percent in Q2 and 49 percent in Q3 2006. That increase was primarily driven by higher microprocessor volumes, lower 45-nm start-up costs and lower microprocessor unit costs, Intel said.

The Santa Clara, Calif.-based company said it expected more sunny skies ahead. For Q4, Intel expects to see revenues between $10.5 billion and $11.1 billion, and gross margin of around 57 percent. For the full year, Intel said it expects to use about $4.9 billion in capital spending, in line with its previous projections.

For more on Intel, see: "Special Report: Inside Intel."