Tech bellwether Intel's earnings top forecasts by 8 cents a share

— -- Intel intc on Tuesday kicked off the upcoming stretch of tech company earnings reports on a decidedly upbeat note.

Intel's first-quarter net income of $647 million, or 11 cents a share, was less than half the $1.44 billion, or 25 cents a share, it reported in the same period last year. Revenue dropped 26% to $7.1 billion.

But Wall Street expected the world's largest chipmaker to report a profit of just 3 cents a share. Some analysts even predicted Intel would lose money for the first time in nearly 25 years.

CEO Paul Otellini proclaimed that "PC sales bottomed" in February, adding that demand has returned to "normal patterns." But he also acknowledged that tech demand is "difficult to predict."

Otellini's optimism lent support to research firm IDC's recent forecast that global IT spending will grow 4.5% in 2010, after stagnating in 2009.

"If any company is a bellwether for the IT industry, it's probably Intel," says Charles King, principal analyst at Pund-IT. "The company has spread its bets effectively — from low-end consumer devices to high-end enterprise computing — across both regional and global markets."

Notably, Intel declined to supply revenue guidance for coming quarters. Gartner analyst Leslie Fiering cautioned that uncertainty remains the watchword.

Large companies are holding onto old PCs because they'd rather have employees working with old gear than lay off workers, she says.

Some schools are using federal stimulus funds to buy tech gear, and many parents are scooping up low-priced netbooks for students. Yet disposable income throughout the economy remains scarce, Fiering says. "There are segments that are buying PCs," she says. "But there are a lot of pressures working against growth."

Gartner projects global PC shipments will tally 10.1% lower in the first three months of 2009, compared with the same period in 2008, and will decline 9.2% overall in 2009 vs. 2008.

Actual first-quarter PC shipments will be finalized at the end of May, and a new forecast will be published in early June.

Bill Whyman, senior managing director at International Strategy & Investment, says demand for tech hardware remains very weak and is likely to continue shrinking over most of 2009.

With job and salary cuts rising, no one really knows what mix of high-end laptops and servers, smartphones, digital cameras, gaming consoles and HDTVs will move off store shelves.

"The big question is whether all the growth will be in the low-end netbook market, which everyone expects," Whyman says. "On the business-spending side, the key will be the strength of the enterprise servers."

Intel shares closed at $16.01, up 3 cents, before the earnings announcement, but slipped 5% to $15.18 in after-hours trading.