Intel's profit up 25% on laptop chip sales


SAN FRANCISCO (AFX) - Intel Corp., the world's largest maker of computer chips, said late Tuesday first-quarter net income rose 25%, more than expected, on surging sales of its chips used to power laptops.

Intel posted a profit of $2.2 billion, or 34 cents a share, compared with the year-ago profit of $1.7 billion, or 26 cents. Sales climbed 17% to $9.4 billion. Analysts polled by Thomson First Call had forecast that Intel would earn 31 cents a share on revenue of $9.3 billion.

Intel sold more of its newest products, which carry a higher profit margin, as computer makers sell more laptops with wireless Internet connections. Intel microprocessors run more than 80% of the world's personal computers.

The company said its gross margin - an important profitability measure -- came in at 59.3% of sales, higher than the 57 percent Intel had projected last month. It raised its 2005 gross margin target to 59%, up from 58%.

"This should put a lot of bears to rest," RBC Capital Markets analyst Apjit Walia said. The rest of the year for Intel "looks solid," he added. RBC rates the stock a "hold."

Chip stocks this year have languished as investors have fretted over how demand is shaping up in the aftermath of last fall's inventory glut and slowing sales of personal computers.

Intel said it's boosting its 2005 capital spending to a range of $5.4 billion to $5.8 billion, up from its earlier forecast range of $4.9 billion to $5.3 billion, due to stronger than anticipated business.

Ahead of the report, Intel shares closed up 42 cents, or 1.9%, at $22.63. The stock rose 2.6% to $23.22 in after-hours trading.

For the three months ended April 2, Intel said revenue from microprocessor chips rose 12.1% from a year ago to $6.9 billion. Flash memory chip sales jumped 39% to $578 million.

Intel said second-quarter revenue will fall within the current range of Wall Street's expectations. It projects sales between $8.6 billion to $9.2 billion.