Intel’s sales beat the Street

By Michal Lev-Ram

Intel announced first-quarter sales and full-year guidance that beat Wall Street estimates after the market close on Tuesday, sending shares up more than 8% in after-hours trading.

Intel’s (INTC) sales came in at $9.7 billion, above the $9.63 billion analysts had expected and up 9% compared to its year-ago quarter.

The chipmaker also reported earnings of 25 cents per share, in line with analysts’ projections but below the 27 cents per share the company earned in the same period a year ago.

“Our first quarter results demonstrate a strengthening core business and a solid global market environment,” said Paul Otellini, chief executive of Intel in a written statement. “We saw healthy demand for our leading-edge processors and chipsets across all segments.”

Intel’s second-quarter outlook was upbeat as well. The company raised its forecast for the quarter, saying it is projecting sales of $9 billion to $9.6 billion, compared with current estimates of $9.2 billion. It also said it anticipates slightly better-than-expected profit margins for the current quarter and full year.

But it’s been a bumpy few months for the Santa Clara, Calif.-based semiconductor giant. The company lowered its sales targets for the first quarter in January. Last month, it reduced its first-quarter gross margin forecast to 54% — compared to a previous forecast of 56%. According to today’s first-quarter results, gross margins came in at 53.8%.

Gross margins, which measure how much money a company makes after subtracting cost of sales, is a key profitability metric in the chip industry that is looked at closely by analysts. Intel cited lower than expected prices for the type of flash memory chips used in digital cameras and MP3 players last month as the reason margins would be lower than it first anticipated.

On Tuesday the company said that strength in its microprocessor business — the type of chips used in PCs and servers — will help offset the decline in memory prices.

Rival Advanced Micro Devices (AMD) has also been challenged due to worries that a slowdown in economic spending is weakening PC demand. AMD recently said first-quarter sales would be well below expectations, and that it would cut about 10% of its staff, or 1,600 jobs. AMD will report its first-quarter results on Thursday.