U.S. stocks rallied Wednesday after Intel reported second-quarter revenue of $8 billion and a promising outlook despite a shrinking PC market. Intel shares rose eight percent, driving the S&P 500 stock index sharply higher and providing a positive ripple effect for other tech vendors, including rival AMD.
Intel reported 12 percent growth in the second quarter, buoyed by microprocessor sales with gross margins more than 50 percent higher than expected. Even though the average selling price dropped for most of its chips, revenue from Intel’s Atom microprocessors and chipsets helped drive growth. Atom generated $362 million in revenue, up 65 percent from the first quarter.
Intel is predicting revenue of $8.5 billion in the third quarter with a 53 percent gross margin.
“Intel’s second-quarter results reflect improving conditions in the PC market segment with our strongest first- to second-quarter growth since 1988 and a clear expectation for a seasonally stronger second half,” said Paul Otellini, Intel president and CEO. “Intel’s strategy of investing in new technologies and innovative products, combined with ongoing focus on operating efficiencies, continues to yield benefits that are evident in our strengthening financial performance.”
PC Outlook Negative
Intel’s outlook seems to contradict a PC forecast from iSuppli, which said the global PC market would shrink this year for the first time since the dot-com bust of 2001. The firm cited falling IT spending and plunging sales of desktop computers. It said global PC shipments would decline to 287.3 million units in 2009, down four percent from 299.2 million in 2008.
“An annual decline in unit shipments is highly unusual in the PC market,” said Matthew Wilkins, principal analyst of computer platforms for iSuppli. “Even in weak years, PC unit shipments typically rise by single-digit percentages. The last decline — in 2001 — was a 5.1 percent decrease in unit shipments…