Intel boosts sales prediction after fall in costs

SAN FRANCISCO - The Nasdaq-listed Intel, the world's biggest computer-chip maker, says first-quarter sales will be at the high end of the company's forecast.
It unexpectedly boosted its estimated profit margin as development costs fell.

Sales will rise to between US$9.2 billion ($12.47 billion) and US$9.4 billion, beating analysts' estimates. Intel in January predicted sales of between US$8.8 billion and US$9.4 billion.

Gross margin, the percentage of sales left after production costs, will be 57 per cent "plus or minus a point", exceeding the 55 per cent estimate, Intel said yesterday.

"The gross margin is a big surprise, and it's a big deal," said Jane Snorek, who helps manage US$110 billion at US Bancorp in Milwaukee, including 17.2 million Intel shares. "They've learned their lesson, and are executing much better."

The report boosted investors' confidence that chief executive Craig Barrett, 65, and his successor, Paul Otellini, 54, were reviving sales after overestimating demand and building a record stockpile of unsold chips last year.

Santa Clara, California-based Intel said it was wringing more profit from its manufacturing, and the costs of introducing technology had been lower than forecast.

Analysts expected first-quarter sales of US$9.15 billion - the average figure in 31 estimates in a survey by Thomson Financial. Sales were US$8.09 billion in the same period a year earlier.

"In all areas we were slightly pleasantly surprised," Intel's chief financial officer, Andy Bryant, said. Bryant said the increased demand came in all products.

The wider profit margin came from lower-than-expected start-up costs on development of chips with thinner, 65-nanometre wires, and reduced microprocessor costs, Intel said in a statement. Building smaller circuits made them faster and cheaper.

- BLOOMBERG