Strong Intel Numbers Signal Hope for IT Industry

Intel's strong second quarter fuels hope that the global recession that has hammered the IT industry may be easing. Excluding a massive fine from the European Union, Intel reports a $1 billion profit on $8 billion in revenue. Intel CEO Paul Otellini echoes his counterparts from Dell and Microsoft by saying he expects enterprise purchases of servers and consumer purchases of PCs to pick up after the recession forced spending cuts. However, purchases of business PCs are expected remain stagnant.

Three months after CEO Paul Otellini announced that the PC market had bottomed out, Intel's latest quarterly numbers indicate that the industry may be stabilizing.

Intel July 14 posted strong numbers in the second quarter, including $8 billion in revenue and a $1 billion profit. However, when the European Commission's $1.45 billion fine for antitrust violations was factored in, Intel's profit swung to a $398 million loss. The EC levied in the fine in May, and Intel has since appealed.

Analysts were encouraged by what they saw from the chip maker.

"They are an early indicator of where the industry is going, and it seems to be going well," Gartner analyst Leslie Fiering said in an interview after Intel's conference call with analysts and journalists.

Echoing what his counterparts at other companies have said throughout the day, Otellini observed that the global recession had forced businesses and consumers alike to hold back on buying new systems. As the recession begins to ebb, Otellini said he expects purchasing-at least in the consumer market-to begin to return to normal seasonal patterns in the second half.

The enterprise market for servers also could continue to grow, though Intel executives said demand for businesses PCs will remain stagnant.

During his meeting with analysts July 14, Dell CEO Michael Dell said businesses were extending the normal refresh cycles for their PCs, notebooks, servers and storage devices for a year or longer, and that eventually they were going to have to replace the hardware.

Similarly, Microsoft CEO Steve Ballmer suggested in an address at his company's Worldwide Partner Conference in New Orleans that Microsoft's upcoming Windows 7 operating system also could help convince businesses to refresh their PCs.

"Even if you take the assumption that [the economy] won't turn around for a long period of time, every minute of every day we're building a pent-up demand for IT," Ballmer said.