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January 16, 2010

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Intel's Q4 profit beats Wall Street estimates

INTEL'S fourth-quarter earnings breezed past Wall Street's expectations, and its rosy profit outlook for 2010 was another sign that a lasting recovery for the recession-battered personal computer market is under way.

As the first major technology company to report its results for the last quarter, Intel is seen as a barometer for the PC market and for technology spending in general. Its revenue beat Wall Street's estimates, as did its gross margin, which can measure how well Intel managed costs.

PC shipments grew more sharply than expected in the fourth quarter, a promising sign after a brutal year for the industry during the recession.

Intel, which supplies the vast majority of the "brains" inside computers, rode the resurgence of consumer PC shopping to a profit of US$2.3 billion, or 40 cents per share.

That was more than nine times as much as it earned in the year-ago quarter, when profit totaled US$234 million, or 4 cents per share.

Intel also posted its highest gross profit margin in history, at 64.7 percent. A higher gross margin number means the chipmaker was able to turn more revenue into profit. It's a key measure for a manufacturing-intensive company such as Intel because it reflects how well costs are held in check.

Revenue climbed 29 percent to US$10.6 billion, as Intel sold more chips, many at higher prices than in the past.

Analysts expected a profit of 30 cents per share and US$10.2 billion in revenue, according to a Thomson Reuters survey.

It's never clear whether chip sales line up with demand for new computers. PC makers might be buying more than they need to replenish low supplies or fewer than they need to preserve cash.

But Intel clearly sees the fourth quarter as more than a holiday shopping-induced blip.

Stacy Smith, Intel's chief financial officer, said in an interview that he believes consumer spending will continue to drive growth in Intel's business in 2010.

While Intel hasn't yet seen signs that big companies are feeling freer to replace old computers, Smith said he believes it will happen this year, once the companies have finished testing the new Windows 7 system from Microsoft Corp that will be installed on most new workplace PCs.



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