Intel says PC sales improving; profit beats Street

SAN FRANCISCO -- Intel Corp.'s first-quarter profit blew past Wall Street's grim forecasts as the chip maker's CEO proclaimed Tuesday that personal computer sales "bottomed out" and have started recovering.

Intel's optimistic comments were especially meaningful because it was the first technology company to report earnings for the first three months of the year. However, Intel didn't give specific revenue guidance, since it's not clear whether people are buying more PCs, or whether computer makers are just replenishing chip inventories that have been whittled down to low levels.

Santa Clara, Calif.-based Intel's net income of $647 million, or 11 cents per share, was less than half what the company earned in the same period last year. But analysts polled by Thomson Reuters were expecting far worse. They had forecast profit of just 3 cents per share. Some analysts even predicted Intel would lose money for the first time in nearly 25 years.

Intel's sales of $7.1 billion were about $100 million higher than estimates.

"We believe PC sales bottomed out during the first quarter and that the industry is returning to normal seasonal patterns," said Intel's CEO, Paul Otellini, said in a statement.

As the world's largest semiconductor company, Intel's results help gauge demand for personal computers, and are a proxy used to assess the health of overall technology spending.

When times are good, consumers and businesses buy more PCs, which leads PC makers to buy more of Intel's chips. When times are tight, PC makers clamp down, and Intel's sales fall.

Analysts were expecting PC makers to loosen the purse strings a little in the first quarter because they need to replenish their pipelines of chips after burning through inventory to save cash over the last few quarters.

Intel owns about 80 percent of the world's PC microprocessor market share, and has been stealing share from smaller rival Advanced Micro Devices Inc. with its new Atom chip. Atom is Intel's first chip for "netbooks," which are mini-laptops that do less than regular laptops, but are very popular because they also cost less.