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Dow 30 Earnings: Intel - Second Quarter 2011
Chip industry leader Intel (INTC – Free Intel Stock Report) has reported some good news for the June period. The company announced record revenues for the fifth consecutive quarter, of $13.0 billion, while earnings per share came in at $0.54. The bottom-line figure represented a 6% improvement from the year-earlier tally. Despite the recent results, the stock price fell modestly in after-market trading.
Revenues were driven by double-digit gains across all of the company's operating segments. More precisely, PC Client Group, Data Center Group, and Other Intel Architecture, increased 11%, 15%, and 84%, respectively, compared to last year's figures. The industry behemoth benefited from healthy corporate demand, the increasing popularity of mobile devices, and elevated Internet traffic, which fueled data center growth. Also, the rapid increase in computing in emerging markets helped results. Overall, revenues climbed 23% in the first half of 2011.
Gross margins also came in roughly as we expected, at 61%, while the effective tax rate of 25% was below company guidance of 29%. Meanwhile, average selling prices were essentially flat across many product lines compared to the March quarter, though they were up relative to last year.
As a result of the good news, we have upped our share-net estimate for full-year 2011. We now anticipate share earnings of $2.45, a $0.15 increment from our view a few weeks ago. Also, we now look for share net of $2.60 for 2012, which is $0.20 higher than our prior expectation. We also believe that revenues for 2011 will approach $54.5 billion, based on management's guidance of approximately $14.0 billion for the September quarter.
We continue to view these shares as a favorable long-term holding for investors seeking technology exposure. It appears that Intel will likely continue to generate healthy annual earnings gains in the years ahead. The company will probably continue to focus its efforts on the non-personal-computer segment of the semiconductor market. Intel is the industry leader in the personal computer market, though it has focused much of its efforts elsewhere in recent times in order to increase diversification and profitability. For example, the company recently purchased McAfee, a producer of security software, and Infineon's wireless unit. Although these purchases cut into cash a bit, they appear to be good long-term strategic fits.
Another avenue for growth for the company is emerging markets. Countries such as China, India, and Brazil represent good avenues for growing business, in our view. Although competition may heat up, particularly in the tablet market, we feel the company's immense size and management strength place it in a lucrative position.
Manufacturing enhancements might well be a key driver for performance at Intel over the 3 to 5 years ahead. The company plans to ramp to a .22-micron manufacturing process by the end of this year, which is at least a year ahead of its competition. This increased die shrink should give it a leg up on other industry participants, due to reduced costs and increased flexibility.
About The Company: Intel Corporation is a leading manufacturer of integrated circuits. In addition to primarily supplying manufacturers of personal computers, the company serves a multitude of other global markets, including communications, industrial automation, military, and other electronic equipment. Intel’s product line consists of microprocessors, with the Pentium series being the most notable. It also manufactures microcontrollers and memory chips, and the company sells computer modules and boards, and network products.
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.