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Strong processor, chip demand spurs Intel earnings

Notebook chip shipments overtakes desktop chip shipments for the first time in the client PC segment

Intel recorded strong earnings in the second quarter of 2008 despite a drop in the average selling price of its chips.

The company’s net income was up 25 percent to US$1.6 billion, or $0.28 per share, compared to $1.28 billion, or $0.22 per share, in the same period of last year. Analysts polled by Thomson Financial had forecast net income of $1.49 billion for the second quarter, which ended June 28.

Intel’s net revenue was $9.47 billion, a year-over-year increase of 9 percent and beating analyst estimates of $9.32 billion.

Growth in demand for lower-priced notebook PCs resulted in a lower-than-expected average selling price of microprocessors, Intel said. However, demand for chips will continue to remain strong through the year, said Intel CEO Paul Otellini in a statement.

“As we enter the second half, demand remains strong for our microprocessor and chipset products in all segments and all parts of the globe,” Otellini said.

The demand for mobile chips will continue to be healthy, driving down prices, as Internet-based computing grows, Otellini said during a conference call.

For the first time, notebook chip shipments overtook desktop chip shipments in the client PC segment, Otellini said.

The bulk of the mobile processor shipments came in the mainstream notebook space, where Intel supplies chips like the Core 2 Duo and Celeron processors. The company announced Atom processors for low-cost PCs during the quarter, but they shipped only in small quantities. Atom will ramp up and become a larger part of the mix in the second half, Otellini said.

Intel hit a snag during the quarter when it delayed the shipment of its latest mobile platform, Centrino 2, code-named Montevina, due to chipset and antenna issues. Intel was able to meet Montevina’s shipment shortfall with Santa Rosa, a Centrino refresh launched during the second quarter.

Centrino 2 was ultimately launched on Monday, and the production of Centrino 2 chips is ramping up, Otellini said. The company will be able to effectively evaluate its market position better at the end of the third quarter, Otellini said.

Intel witnessed strong revenue growth worldwide, but the earthquake in Western China slowed down growth in that country, Otellini said. Intel expects to regain momentum as the Olympics approaches and as the country rebuilds its infrastructure, Otellini said.

By the end of the second quarter, Intel’s headcount reached less than 82,000 employees, down 2,700 sequentially, with many of the employees going to Numonyx, a flash memory joint venture with STMicroelectronics. Intel’s headcount has fallen by around 20,000 from the second quarter of 2006.