Intel shares jump after results meet lowered forecasts

SAN FRANCISCO — Intel shares gained late Tuesday after the company reported results in line with what analysts had expected after the chip maker had warned weak PC demand would hit sales.

The Santa Clara, Calif.-based company said revenue was $12.8 billion in the first quarter, flat with a year ago, and compared to $12.9 billion expected by analysts surveyed by Thomas Financial.

It made $2 billion in profit, up a hair from $1.9 billion.

The chip maker's earnings were 41 cents per share, in line with forecasts.

Intel shares rose 2.99% in after-hours trading to $32.43 a share.

Intel has faced a hard quarter, with PC sales falling, a strong dollar making its products more expensive and bad times in some of its major overseas markets.

"We believe Intel will face difficult comparisons over the next year as it relies on underlying demand now that the migration from XP has largely ended," said William Kreher, an analyst with Edward Jones in St. Louis.

Last month the Santa Clara, Calif.-based company warned that revenue would be nearly $1 billion short of forecasts. The poor outlook was based on weaker than expected demand for business desktop PCs and lower than expected inventory levels among computer suppliers.

Intel had forecast its gross margin, a measure for profitability, would be around 60%. It came in at 60.5%.

The company is predicting flat revenue growth for the year. While its PC business is down, it says it will offset that with moves into other areas.

The company had "double-digit revenue growth in the data center, IoT and memory businesses offsetting lower than expected demand for business desktop PCs," Intel CEO Brian Krzanich in a statement. "These results reinforce the importance of continuing to execute our growth strategy."

Intel is the world leader in semiconductor chips used in computers as well as network controllers and embedded processors.

It predicted revenue of $13.2 billion for the second quarter, plus or minus $500 million.

Sales of PC chips should increase later in the year. Microsoft will be releasing Windows 10, which should entice many PC users to upgrade their machines, said Mark Hung, lead Intel analyst with the research firm Gartner, in Santa Clara, Calif.

Intel is also readying a new architecture for its chips in the third quarter. Called Skylake, it promises faster performance with lower power consumption.

"We are enthusiastic about the release of Windows 10 this summer, especially when combined with Skylake," Intel CFO Stacy Smith said on a call after the earnings figures were released.

Intel had been reported in talks to acquire Altera, a maker of programmable semiconductors used in data center computer servers. However the deal fell through last week.