Intel shares jump on strong profit, revenue

SAN FRANCISCO -- Shares of chip giant Intel intc jumped Wednesday, a day after it reported strong quarterly earnings and an optimistic outlook.

The No. 1 chipmaker posted revenue of $9.7 billion in the first quarter, up 9% from $8.9 billion a year ago. Every region grew, and "overall demand seemed to be healthy and in balance," CEO Paul Otellini said.

The news doesn't necessarily mean that the U.S. economy is making a big recovery.

But many of Intel's gains may have come at the expense of its chief rival, Advanced Micro Devices. "We think they picked up a significant amount of market share from AMD," says analyst Ashok Kumar at CRT Capital Holdings.

Plus, "75% of Intel's revenue is not in the U.S.," Otellini said. "Much of the (macroeconomic) concern … has to do with the U.S., especially Manhattan," he said, referring to the recent Wall Street banking crisis. "We really don't see it impacting business."

Intel's net income of $1.4 billion, or 25 cents a share, fell from $1.6 billion, or 28 cents a share, a year ago, but topped Wall Street expectations.

Intel expects revenue of $9.0 billion to $9.6 billion in the current quarter, slightly more than Wall Street had expected.

Sales of processors, or computer "brains," for back-office servers were particularly strong. That's an area where AMD used to excel.

AMD amd reports earnings Thursday and has already warned that the results won't be good. The company also said last week that it is laying off 10% of its staff, or about 1,680 workers.

In comparison, "Intel is in a good position," says chip analyst Dean McCarron at Mercury Research. "It's a very large and global company" with a strong product line-up.

One trouble spot: flash memory. That's the type of computer memory used to store data on many cellphones, digital cameras and other portable devices.

Technology changes have made flash easier to make, and supply now far exceeds demand, McCarron says. As a result, "Prices have been plunging," he says. Many flash memory chips are sold at a loss.

Intel increased the number of flash chips it sold in the quarter, but prices fell far enough to offset gains. Intel has already spun off part of the business as a joint venture with STMicroelectronics.

Although some investors want Intel to spin off the rest of division, "I'd be happy if they just kept (investment) in the absolute minority," says analyst Doug Freedman at American Technology Research.

Otellini is considering all options. "We entered this business to make money," he said.

Intel also said that the number of laptop processors it sells should top the number of desktop processors for the first time later this year, an indication of the growing popularity of mobile computing.