Intel booms on chip demand

CHIP maker Intel is back on track for a revenue boost this year after surging sales of its Centrino microprocessor for laptop computers. The turnaround in fortunes comes just a year after the chip giant was dogged by doubts over its future.

The company now says second-quarter revenue will be between $9.1bn (£5bn) and $9.3bn, up from the $8.6bn-$9.2bn range it forecast in April. Gross margins will rise to about 57%.

Chief financial officer Andy Bryant told analysts that demand is shaping up well with orders for the Centrino, the chip that drives laptop wireless technology, above even the company's most optimistic forecast.

It is a dramatic turnaround at the chipmaking giant from last year when analysts feared for the company's health. But those concerns are in the past, Bryant said, adding that demand was outstripping Intel's capacity to supply some products, such as chip sets that work in tandem with its microprocessors.

The bullish new forecast caps a psychologically good week for Intel, during which Apple Computer's Steve Jobs capitulated and announced he was dumping chip supplier IBM in favour of Intel, which already powers 80% of the world's personal computers.

It is also good news for the industry because Intel remains a bellwether for tech stocks and the booming sales of laptops augurs well for the coming quarter at other companies. It also backs up other indicators for the industry.

Texas Instruments, for example, earlier this week raised its second-quarter earnings forecasts on higher demand for semiconductors and educational calculators. Meanwhile, the US-based Semiconductor Industry Association boosted its forecast from flat to 6% growth this year on stronger demand for PCs, mobile phones, digital TVs and digital cameras

The SIA's president, George Scalise, said industry circumstances have changed. He added: 'Our cautious forecast, issued in November 2004, was based on concerns that high energy prices and lingering excess inventories in a few segments of the industry would dampen sales in 2005. Those fears have not materialised.'

Intel and other chipmakers did briefly suffer from excess inventory in 2004, but quickly recovered, Scalise said. In any case, the pile-up of stock was worth only $1.5bn compared with the disastrous $15bn in 2000 which took three years to clear.

While the markets had been expecting good news, and only nudged up Intel's share price by 2%, the shares have risen by about 25% from April lows as stock and demand fears eased.