Global chip major Intel Inc has reported its best quarterly performance in history with a second-quarter profit of $2.9 billion, driven by strong consumer demand emanating from an improving global economy. Intel exclusively provides the processors found in Apple’s entire range of Macs, both desktops and laptops. And the high-end MacBook Pro line also includes Intel’s integrated HD Graphics, which are automatically enabled through smart graphics processing switching technology in order to conserve battery life.
The NPD Group recently found that year-over-year Mac sales were up 35% in May in the U.S. Apple will report is June quarter results next Tuesday after the market closes, and Wall Street expects the company to report sales of about 3.1 million. Intel’s success even came with its low-end Atom chip, which at one point was rumored to power Apple’s then-in-development iPad. Instead, Apple opted to create its own ARM-based processor to power its mobile devices, including the iPad and iPhone. Atom revenue increased 16 percent for the quarter, despite the fact that Apple has found great success with its custom A4 processor in its own mobile devices. Atom chips are mostly found in low-end netbooks, which are viewed as competitor to Apple’s iPad.
“Strong demand from corporate customers for our most advanced microprocessors helped Intel achieve the best quarter in the company’s 42-year history,” Intel president and CEO Paul Otellini said.
“Our process technology lead plus compelling architectural designs increasingly differentiate Intel-based products in the marketplace. The PC and server segments are healthy and the demand for leading-edge technology will continue to increase for the foreseeable future,” Otellini added.
Intel Corp. is expecting revenue of around $11.6 billion in the third quarter.
In a conference call for investors, Paul Otellini, said Intel benefited from the broad-based return of the enterprise and small business segments. He attributed some of the enterprise growth to the PC upgrade cycle. Large companies, he said, are seeing their old machines costing more to keep on their books than they are worth and are eager to upgrade to Windows 7. Otellini said Intel had shipped 75 million Atom processors and expected to see 40 million Atom-based netbooks shipped this year.
“Our Atom business also performed very well, growing 16% sequentially,” Otellini said, noting that new Atom business can be expected to come from embedded devices and from the companies working on Google TV-related products.
Intel
Otellini also noted that Intel’s booming data center business was benefiting from the cloud computing build-out. Companies, he said, were buying new equipment to meet capacity needs and to benefit from improved efficiencies in new servers, such as power consumption and smaller footprint.
“Computers are important, independent of the economy cycle,” Otellini said. “The difference now is that corporations are buying in addition to consumers. Computers are fundamental to people’s lives these days.”
Analysts have been concerned that Intel’s core PC business may be threatened by the growing popularity of smart phones and tablets, such as Apple’s iPad, which primarily run on lower-cost ARM chips made by competing manufacturers. Intel has responded by developing its own processor, code-named Moorestown, which is designed for similar uses.
“The new product will be popular in tablet computers and will allow Intel to dip its toe into the smart-phone market,” chip industry analyst Linley Gwennap wrote in a report last month after the Moorestown chip was unveiled.
Other analysts have been skeptical. “We question whether Intel’s efforts will work,” said FBR Capital Markets analyst Craig Berger, in a recent note to his clients, “and we note that Intel has a long track record of poor performance in penetrating new markets outside of the PC market.”
But despite some analysts’ concerns about continued turbulence in the world economy, Berger also said his research shows strong demand for PCs will continue through the year, with many corporations deciding to go forward with new hardware purchases they had put off during the recession. That trend is good for Intel’s core business.
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