As expected, Intels success was founded on microprocessor sales, which rose 22 percent from a year ago to $6 billion. The Intel Architecture Group, which includes microprocessors, chipsets, and motherboards, recorded $7.03 billion in total revenue, and $3.0 billion in profits. Still, Intels primary Intel Architecture business unit was the only unit that reported a positive operating income, indicative that Intels communications reorganization has yet to bear fruit.
Intels earnings were also affected both by its recent settlement with Intergraph Corp. and by an improvement in yields that pushed the companys inventory levels to their highest point in several years, $2.8 billion.
"If you take inventory out of everything, if you take Intergraph out of everything, we would have been right on our original forecast," Andy Bryant, Intel chief financial officer, said in a conference call with analysts Tuesday afternoon. In its midquarter update, Intel predicted that revenues would come in between $8 billion and $8.2 billion.
Intel of Santa Clara, Calif., reported net income of $1.7 billion on revenue of $8.1 billion for the first quarter. The companys net income and revenue increased 89 percent and 20 percent, respectively, compared with a year ago; the companys revenue dipped by 7 percent versus the fourth quarter; and net income declined 20 percent.
In settling a recent patent dispute with Intergraph, Intel agreed to pay $225 million to Intergraph and recorded a corresponding $162 million charge to its first-quarter results. Intel will pay out the remainder over five years as an amortized charge for intellectual-property transfers.
Overall, however, Intel executives professed themselves pleased with the companys results in what is typically a down period following the holiday sales season. Shipments of microprocessors, motherboards and chipsets all declined. Microprocessor average selling prices (ASPs) were flat, excluding sales of chips into the Microsoft Xbox gaming console.
Revenues at Intel and other technology companies typically fall during the first quarter, as sales slump from the strong holiday sales season. Intel is also in the midst of a shift to its desktop Prescott processor, new PCI Express chipsets and the relaunch of its delayed Dothan mobile processor.
"In summary, our 90-nm process and ramp is healthy and ramping fast," said Paul Otellini, Intels president and chief operating officer. "Prescott is moving to the mainstream in Q2. Dothan is in volume production now. We are ideally positioned for a strong second half with new products and platforms."
Intel sold "millions" of Prescott chips during the first quarter, and the company is up to a weekly run rate of more than 1 million Prescotts, said Otellini, adding that he expects Prescotts to outsell the older "Northwood" chip this quarter. But Otellini admitted that shipments of the Prescott were "tight," especially early in the quarter.
Sales of mobile processors were down sequentially, but Intel expects a much higher percentage of Pentium M processors to be sold this quarter, Otellini said.
In servers, Intel noted a shift toward dual-processor platforms; year-over-year dollar sales in the server segment climbed 40 percent. Nocona, the first server processor to use Intels new 64-bit extensions, is on track to ship in July, Otellini said, a slip from the second quarter.