Intel Sees Strong Notebook Growth in Q3

Intel earned a $1.9 billion profit on $9.39 billion in revenue for the third quarter, and Intel CEO Paul Otellini noted the particularly strong demand for consumer notebooks, a trend he said will continue into the fourth quarter. Consumers will continue driving the recovery of the PC market into early next year as businesses continue to hold back on spending. However, Otellini said he expects to see corporate PC spending grow as the need to refresh aging systems grows and Microsoft's Windows 7 OS hits the market.

Intel's third-quarter financial numbers indicate that consumer technology purchasing is continuing to grow, particularly in the notebook space.

The world's largest chip maker earned almost $1.9 billion in profit-just below the $2 billion earned during the same period last year-on $9.39 billion in revenue, down from $10.2 billion in the third quarter 2008. Still, the jump in revenue between the second and third quarter was the largest sequential growth in about three decades, according to CEO Paul Otellini.

In a conference call with analysts and journalists, Otellini said the consumer PC market continues to show signs of a strong recovery, and that dovetailed with the various products Intel has put in place over the past several months, including refreshing the PC line of processors with the "Nehalem" microarchitecture.

"It's the right products at the right cost at the right time for a recovering global economy," he said.

In particular, notebook sales were strong, he said, pointing out that revenue for the company's Mobility Group was up 19 percent over the previous quarter.

Analyst firm iSuppli also said the PC market helped boost Intel. The firm said global shipments of PCs-including desktops, notebooks and entry-level servers-were estimated to hit 73.8 million units in the third quarter, up 9.8 percent over the second quarter.

Netbooks, based on Intel's Atom chip, also saw a healthy quarter, he said, though it was notebooks that significantly pushed Intel's PC numbers forward.

Looking to the fourth quarter, Intel officials are looking for revenue to come in at about $10.1 billion. Otellini said the PC market going into 2010 will continue to be driven by the consumer space.

Analysts expect Microsoft's upcoming release of its Windows 7 operating system-due out Oct. 22-will further help drive sales of PCs. Otellini said consumers will embrace the OS before enterprises will.

Businesses currently are qualifying Windows 7, but Otellini doesn't see them refreshing PCs until sometime in 2010. However, enterprises are now saddled with an increasingly aging fleet of PCs that are costly to maintain. That combined with Windows 7 should help drive sales of new corporate PCs. He pointed out that Intel officials have plans in place to refresh many of their own employees' PCs as an example.

"The compelling argument to refresh is there," he said.

Otellini also said he expects the Nehalem processors to be strong profit drivers in servers. Already the quad-core Xeon 5500 Series chips for two-socket systems are making inroads in the data center. Intel is gearing up for the release of eight-core Nehalem EX processors for four-socket servers late this year.

Otellini said he expects the Nehalem EX line to steal workloads away from Unix systems such as IBM's Power processors and Sun's SPARC chips, but noted that that's a relatively small market. Refreshing current high-end Xeon systems will be as important, Otellini said.