Intel on Tuesday reported profit and revenue gains for the third quarter of fiscal 2011 on strong PC and server chip sales, overcoming a drop in Atom tablet and netbook chip sales.
Intel benefited from strong microprocessor shipments and double digital growth in laptop unit shipments, said Intel CEO Paul Otellini, in a statement. The company saw strong data center growth, driven by the growth of mobile and cloud computing, Otellini said.
The company reported profit of $3.7 billion on a non-GAAP (generally accepted accounting principles) basis for the quarter ending on Oct. 1, up 24 percent compared to the same quarter in 2010. Earnings per share for the quarter was $0.69, beating estimates of $0.61 from analysts polled by Thomson Reuters.
Intel's profit was $3.5 billion and earnings per share was $0.65 on a GAAP basis, after accounting for tax and acquisition charges.
On a non-GAAP basis, Intel reported revenue of $14.3 billion, up 29 percent compared to the previous year's third quarter. On a GAAP basis, Intel reported revenue of $14.2 billion. Analysts estimated revenue for the quarter to be $13.9 billion.
Revenue for the PC Client Group, which deals in laptop and desktop chips, was $9.4 billion, growing by 22 percent compared to last year's third quarter. The Data Center Group, which ships server chips, had revenue of $2.5 billion, up 15 percent year-over-year.
However revenue from the Intel Atom microprocessor and chipset was only $269 million, down 32 percent year-over-year. Intel is pinning its hopes on Atom processors as it puts more focus on handheld devices and looks to put the low-power chips in tablets and smartphones.
Atom sales dropped mostly due to the slow netbook demand, said Stacy Smith, chief financial officer of Intel, on a conference call.
Intel's revenue growth comes at a time when analyst firms are reporting slow growth in quarterly PC unit shipments, partly due to the growing interest in tablets. According to IDC, worldwide PC shipments increased by just 3.6 percent during the third quarter this year compared to the year-ago quarter.
Intel's laptop business saw double-digit sales growth due to strong enterprise demand, Otellini said on the call. However, the consumer PC market is weak as demand for products has softened in mature markets such as the U.S. and Western Europe.
By contrast, emerging markets such as China, India and Brazil are growing fast and becoming more important for Intel, Otellini said. Today, China is the top PC market, while Brazil is the third largest, he said. Intel's revenue from China grew by 12 percent year over year, while India revenue went up 21 percent in the quarter.
In a bid to take on tablets and reinvigorate interest in PCs, Intel is pinning its hopes on ultrabooks, which the company is promoting as a new category of thin and light laptops with tablet-like features. The first set of ultrabooks have already been announced by Lenovo, Asus and Toshiba, with prices starting at $899.
But the average price of an ultrabook is $1,000, which critics say is high, especially with consumers looking for discounts in the slumping PC market. However, ultrabooks are still in their early days, and prices will continue to drop as development gains ground, Otellini said.