Intel Beats Earnings Expectations Despite Slower PC Market

Chipmaker Intel just reported quarterly earnings of 59 cents a share, beating the expectations of analysts who had expected earnings of 53 cents. Revenues were $11.5 billion, ahead of the forecast of $11.37 billion. Sales were up 8 percent versus the year-ago quarter, while profits surged 48 percent. Gross margins, a key measure of profitability, was 67.5 percent, slightly above the company’s prior guidance. Intel shares are trading up by 1.7 percent after hours.

Intel said in its statement that PC Client Group revenue was flat. Other groups were stronger: Data Center Group revenue was up 35 percent, and Intel’s architecture group saw sales surge by 27 percent. Intel Atom microprocessor group, its low-power chip aimed at tablets and smartphones, saw revenue grow 8 percent. This despite word from Microsoft last week at the Consumer Electronics Show that it will develop a version of Windows for ARM-based chips from Texas Instruments, Qualcomm and Nvidia aimed at tablets and smartphones. Microsoft’s move calls into question Intel’s hopes to land design wins for the Atom low-power chip that it hopes to sell to manufacturers of smartphones and tablets, but which has yet to show any significant results.

This report of flat revenues for PCs comes a day after Gartner and IDC both said they saw weaker-than-expected sales of PCs in the fourth quarter of 2010.

For its 2011 first-quarter outlook, Intel said it expects revenue of $11.5 billion, plus or minus $400 million, and a gross margin of 64 percent, plus or minus a couple of points. For the full year, it expects gross margins to be 65 percent, plus or minus a few points. More after I go through the numbers and attend the conference call, which starts in about an hour.