NEW YORK (CNNfn) - Intel Corp. reported first-quarter net income that beat analysts' expectations, as the company benefited from strong demand for its microprocessors.|
The world's largest maker of semiconductors reported net income excluding acquisition costs of $3.1 billion, up 52 percent from the first quarter of 1999 and up 28 percent from the fourth quarter of last year. On a per share basis, Intel's net income before acquisition-related costs rose to 88 cents per share from 58 cents in the same period last year.
Andy Bryant, chief financial officer at Intel, talks with Money Line's Stuart Varney, on Intel's latest profit report.
First-quarter revenue rose 13 percent to $8 billion from $7.1 billion. Intel said that it expects its revenue for the second quarter to be flat with the first quarter, and that "product supply will continue to be tight in the second quarter as demand is expected to be better than seasonally normal."
Intel's first-quarter earnings per share included a one-time tax benefit of 17 cents per share. Without that gain, it would have reported earnings per share of 71 cents, two cents above the mean analyst estimate for the quarter, according to First Call. Intel released its results after the closing bell Tuesday.
Prior to the news, Intel (INTC: Research, Estimates) shares closed at 129, up 6. The company's shares slipped 3-3/16 in after-hours trading.
"Demand in the first quarter was stronger than we expected at the beginning of the year and continues to be stronger as we enter the second quarter," said Craig Barrett, president and chief executive officer. "We also expect a strong second half, and are accelerating our investments in capacity to meet future demand."
Intel said earlier this month that it will invest $6 billion this year to increase its chip production capacity, amid rising global demand. The company will spend about 80 percent of that amount on manufacturing capacity for computer chips and the remaining 20 percent on the production of flash memory chips, Barrett said earlier this month.
"While supply remains tight entering the second quarter, we are ramping our 0.18-micron manufacturing technology rapidly in five facilities and expanding to eight facilities by year-end, which will substantially increase supply in the coming quarters," Barrett said in Intel's earnings release Tuesday.
"We under-forecasted demand beginning in last year's third and fourth quarters," Andy Bryant, Intel's chief financial officer, told CNNfn's Moneyline Tuesday. "I don't have enough product to be as aggressive as I would like to be."
Intel is expected to revamp its entire microprocessor line in the second half of this year, eventually replacing the Pentium III and Celeron processors with one named Itanium and processors code-named Willamette and Timna. The Itanium is a 64-bit microprocessor, which means that most data-intensive applications, such those used for databases and graphics, will run faster than they would on Intel's current generation of 32-bit microprocessors.
While Intel is best-known for supplying more than 80 percent of the microprocessors used in PCs, it also makes chipsets, flash memory, networking and communications products, embedded processors and microcontrollers, and PC-peripheral products.
The company's microprocessor unit shipments were approximately flat with fourth quarter, as were the average selling prices for microprocessors. Flash memory unit shipments rose to a new record in the first quarter, while unit shipments of Intel's communications products, such as switches and telephony boards, were flat or down from the fourth quarter.
Intel's gross margin rose to 63 percent of revenue in the first quarter from 61.3 percent in the fourth quarter, as the company's revenue was stronger than expected. Intel's Bryant, said that he expects the company's gross margin to be "flat to down a point" in the second quarter, as Intel invests in new products and expanded manufacturing capacity.
Intel's stock is up 57 percent this year and now sells for 43 times its expected earnings per share for 2000, a lofty multiple by Intel's historical standards.