Tuesday, October 12, 2010, 09:25 pm PT (12:25 am ET)
Intel posts record earnings, concedes iPad may be nibbling at PC marginsIntel beat analysts' expectations with a 59 percent increase in third-quarter earnings year-over-year and a record $11.1 billion in revenue, while cautioning that sales of the iPad may be impacting PC sales.
For the first time in the Santa Clara, Calif., company's history, Intel's quarterly revenue exceeded $11 billion, the company reported on Tuesday.
Intels third-quarter results set all-time records for revenue and operating income, said CEO Paul Otellini. Intel has posted several outstanding quarters in a row, with its most recent third-quarter earnings edging out stellar second-quarter earnings to set the records.
Wall Street analysts were pleasantly surprised by the news, having predicted revenue of $10.99 billion on average, according to a report by the Wall Street Journal. In late August, Intel lowered its revenue forecast for the third-quarter, citing "weaker than expected sales of consumer PCs in mature markets."
During the earnings conference call, Otellini specifically addressed what he called "the big question on everyone's mind:" how Intel will respond to the new computing category of tablets.
Otellini praised Apple for its success with the iPad. "Apple has done a wonderful job reinventing the category," he admitted, going on to say that tablets will "probably" impact PC sales at the margin.
"Consumers will have a limited amount of discretionary income and some will choose to purchase a tablet instead of upgrading an existing PC or purchasing a netbook in any given period."
Despite Apple's early gains in the tablet market, Otellini remains confident that Intel can "win this segment." "We take a longer-term view of the tablet opportunity," Otellini continued. "In the end, it will be additive to our bottom line, and not take away from it."
Otellini reassured investors that Intel is currently working with a number of partners to bring to market tablets running Windows, Android and MeeGo operating systems across a "variety of form factors and price points."
Looking forward, Intel predicts fourth-quarter revenues of $11.4 billion, plus or minus $400 million.
As one of the first companies to report quarterly earnings, Intel is seen as a bellwether. Apple will reveal its quarterly earnings report on Monday, Oct. 18 at 5 p.m. Eastern, 2 p.m. Pacific.
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