The pressure was on the world's largest chipmaker and judging by the company's outlook, Intel did not disappoint.
The company reported 25 cents a share in EPS on $9.67 billion, essentially in line with Wall Street expectations. Intel's gross margins of 53.8 percent also were in line with expectations. But the good news comes from the company's outlook, now anticipating second quarter revenue between $9 billion and $9.6 billion, which raises the mid-point of Wall Street expectations which were just above $9.23 billion.
Further, Intel now anticipates gross margins in the second quarter of 56 percent, a full point ahead of analyst projections. Same goes with full-year projections, with Intel now expecting 57 percent in gross margins, two full points ahead of Street expectations.
The margin story is so important for Intel especially because of the pressure this company has been under to perform. Serious gluts of memory chips on the world market have crushed the company's margins in recent months, with so-called NOR flash memory revenue off better than 50 percent. Intel had anticipated a decline of only 15 or 20 percent.
Still, despite that huge drop off, the company still says it can improve margins in the second quarter and full year, and is raising revenue expectations at a time when so many experts have been worried about a global economic slowdown, above and beyond the recession worries in the U.S. Some had suspected that because Intel gets better than 70 percent of its revenue from overseas customers, it was somewhat insulated from economic worries domestically. Intel's earnings today seem to bear that out.
Nonetheless, there are plenty of experts on Wall Street who say that Intel may decide to shy away from memory products despite big partnerships recently with STMicroelectronics and Micron . Flash memory only represents 10 percent of the company's revenue, but it has been a major drain on the bottom line and margins. There's some discussion among experts that Intel may consider spinning off this part of its business, and it's an issue likely to come up on the company's conference call when it begins at 5:30 pm EDT.
And despite so much pessimism ruling the Street nowadays, Intel CEO Paul Otellini said in the company's earnings release that "we remain optimistic about our growth opportunities as we continue to reap the benefits of our 45nm technology leadership."
Concerns that a significant slowdown cited last week by rival Advanced Micro Deviceswould also be felt by Intel appear to be unfounded since Intel actually beat revenue expectations, if only slightly.