Intel Meets Profit Forecast, Gives Upbeat Outlook

Intel reported lower earnings that matched analysts' estimates, but the company's shares took off in late trading as it gave guidance that was higher than expected.

Paul Sakuma / AP Intel's headquarters in Santa Clara, California.

The world's largest maker of semiconductors said on Tuesday first-quarter net income fell to $1.44 billion, or 25 cents per share, from $1.64 billion, or 28 cents a share, a year ago. Revenue rose to $9.67 billion from $8.85 billion.

Intel was seen earning 25 cents a share and reporting a topline of $9.629 billion, according to figures compiled by Thomson Financial.

The company also boosted its forecast for the current quarter, saying it expects sales of $9 billion to $9.6 billion, compared with current estimates of $9.24 billion.

Intel shares

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[INTC  Loading...      ()   ], which closed 1.06 percent higher at $20.91 Tuesday, jumped 8 percent in extended electronic trading.

The company also said it sees gross margins of 56 percent in the second quarter, compared with an expected 54.9 percent. For the full year, Intel now expects gross margins of about 57 percent. The Street had expected 56 percent for the full year.

"The full year gross margin guidance of 57 percent, plus or minus a few points, is pushing the stock up. The concern was that the memory business was dragging down the gross margins, which would drag down earnings. The general consensus was that it would be more like 56 percent," said Doug Freedman, an analyst with American Technology Research.

"The combination of slightly better-than-expected revenue growth, better-than-expected margin forecast and the speed of the gross margin recovery means that Street estimates are likely to move slightly higher."

Intel had set the same margin target in January, then in March scaled back margin expectations for the first quarter, citing flash memory chip prices.

Early last month, Intel cut its first-quarter gross-margin forecast, citing weaker pricing on certain memory chips. Prices in the NAND flash memory-chip market have been under pressure for more than a year now.

More Oversupply of NAND Memory Chips

Intel expects continued oversupply of NAND memory chips, used in cell phones and other gadgets, for the remainder of the year, the company's chief financial officer told Reuters.

"As expected we saw weak pricing," CFO Stacy Smith said in a phone interview. "We do expect to see continued oversupply throughout the rest of the year. That's what we have baked into our forecast."

Shares of Intel have declined 21 percent this year, compared with a 14 percent decline in the Nasdaq.

- Reuters contributed to this report.