Intel profit rises, driven by notebook PC sales

By Duncan Martell

SAN FRANCISCO (Reuters) - Intel Corp reported a 25 percent rise in quarterly profit, helped by strong sales of microprocessors used in notebook computers, and gave a revenue forecast that topped expectations.

But its second-quarter gross margin disappointed some analysts as the world's biggest chipmaker said higher demand for cheaper laptops led to a lower-than-expected average microprocessor selling price.

"The concern on the Street was that demand may be falling off the cliff. We've seen that in the handset market. So at least as Intel's results and outlook goes, we're not seeing similar weakness in the PC market," said CRT Capital Group analyst Ashok Kumar.

"The only mild disappointment was in the gross margin line due to a higher mix of low-end notebooks, but overall I think the result was a surprise on the positive side, given the macro environment," Kumar said.

Intel's results kick off the earnings season for U.S. tech companies. Advanced Micro Devices Inc, Intel's only remaining rival in the microprocessor market, Google Inc, International Business Machines Corp and Microsoft Corp all report results this week.

"I think right now investors are looking at technology as a glass that's half-empty and not half-full, but relative to other sectors, the negative earnings revisions in technology have been more mild," Kumar said. "And if we can navigate through seasonally weak summer months, we should get a seasonal tail-wind for the technology sector."

Shares of the technology bellwether ticked higher to $20.85 in late extended trading, compared with their Nasdaq close of $20.71. So far this year, Intel shares have fallen 22 percent, compared with a 15 percent decline in the Philadelphia Semiconductor Index.

Intel's second-quarter net income rose to $1.60 billion, or 28 cents per share, from $1.28 billion, or 22 cents per share, a year ago. That beat the average Wall Street estimate for a profit of 26 cents per share, according to Reuters Estimates.