Intel's Third Quarter Results Break Records, Smash Expectations
First, let's do the numbers. For the third quarter of 2009, Intel reported total revenue of $9.4 billion (up $1.4 billion from Q2) and a net income of $1.9 billion (up $807 million quarter-on-quarter.) The company's gross margin was 57.6 percent, up almost seven percentage points from Q2. The 17 percent growth in revenue from Q2 to Q3 broke records that have stood for over thirty years, but we are still in a recession—year-on-year revenue was down eight percent, although this is still stronger from the year-on-year declines of 26 percent and 15 percent that Intel recorded in the first and second quarters.
Intel attributes the growth to a confluence of factors that includes tighter inventory management, excellent yields at both 45 and 32nm, strong demand for Nehalem across both consumer and enterprise product lines (although the enterprise segment remains weak overall), continuing demand for Atom, and growth in the mobility segment. The manufacturer made a point of noting that mobility demand grew more than demand for Atom-based products and emphasized that while it remains focused on Atom and the new markets it believes the processor will open long-term, current netbook sales are "additive" to the company's business, as opposed to a core driver.
Company CEO Paul Otellini holds up a wafer of 22nm processors at last month's IDF
Intel is seen as a bellwether of the tech industry; the company's strong results and equally positive expectations for Q4 could be signs that the IT economic recovery is beginning. At the same time, however, Intel noted that the market is being driven by consumer demand for mobile products in particular far more than any enterprise recovery. As a result, there's a higher chance that an unforseen economic shock could take the legs out from under the burgeoning lift. Even if no such shock occurs, the fact that the economic momentum is moderately confined to a particular area means that the benefits of that shift won't be evenly distributed. The rising tide, in this case, will lift the boats of those OEMs and device manufacturers positioned to take advantage of it.
As for AMD, we'll find out tomorrow, but there's not a lot of reason to think Intel's good fortune filled its competitor's sails. AMD's share of the mobile market remains just a fraction of Intel's, and the company's Phenom II faces increased pressure from Intel's Lynnfield/Core i5 platform. The best-case scenario for AMD (and I'll personally be eating crow on this tomorrow if I'm wrong) is that the company reports flat sales for Q3 after seasonal trends are taken into consideration, while the shift to 45nm reduces its cost-per-processor. If all goes well, AMD will report that it narrowed the gap between its net revenue and operating loss, but CEO Dirk Meyer won't have an easy time returning the company to profitability by Q4.