WSJ article: Intel profit rises 19%, Boosted by Tax Benefit

Intel's Net Rises 19%,
Boosted by Tax Benefit
By JONATHAN VUOCOLO and DONNA FUSCALDO
April 17, 2007 5:02 p.m.

Intel Corp.'s first-quarter net income rose 19%, boosted by a tax benefit. Microprocessor unit costs fell and previously reserved inventory was sold, more than offsetting a slight decline in revenue.
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The Santa Clara, Calif., chip maker's earnings rose to $1.61 billion, or 27 cents a share, from $1.36 billion, or 23 cents a share, a year earlier.

Intel said results were boosted by the recognition of money previously set aside to pay taxes. That benefit lifted earnings by $300 million, or five cents a share.

Revenue fell to $8.85 billion from $8.94 billion a year earlier.

Intel had forecast revenue of $8.7 billion to $9.3 billion in January.

First-quarter gross margin was 50.1%, up from 49.6% the previous quarter but down from 55.1% a year earlier.

Chief Financial Officer Andy Bryant said in a conference call that inventory in the quarter was flat. He said the company is aiming for inventory in the second quarter to remain flat to slightly higher.

Mr. Bryant declined to comment on whether the semiconductor company gained market share during the first quarter, saying only that once the data are revealed, it should be "positive" for Intel.

Looking ahead to the remainder of the year, Mr. Bryant said he expects any uptick in demand due to Microsoft Corp.'s Vista operating system has been built into Intel's financial targets.

Operating expenses fell 15% to $2.76 billion. The company saw both research and development and marketing, general and administrative costs fall. Intel also said it met its goal of reducing its work force to 92,000 people a quarter ahead of schedule.

Weaker prices for computer chips had hurt Intel and Advanced Micro Devices Inc., which have been engaged in a prolonged price battle. However, Intel said in its Wednesday press release that prices held up well in the competitive environment.

Industry watchers, citing AMD's sale warning on April 9, say Intel has gained ground against its rival. AMD cut its outlook earlier this month because of lower overall average selling prices and decreased unit sales. AMD is scheduled to report results Thursday.

For the second quarter, Intel expects revenue of $8.2 billion to $8.8 billion. Analysts are looking for revenue of $8.86 billion. Intel also expects gross margin to be around 48%.