Intel Rallies on Strong Sales Guidance

Updated from June 3

Intel(INTC) tilted its second-quarter sales guidance to the high end of its previous range, outlining a forecast for revenue of $8 billion to $8.2 billion due to better-than-expected demand for its flash memory chips.

Demand for Intel's flagship microprocessor chips is running in line with expectations, the company said.

Intel shares were recently up 78 cents, or 2.9%, to $28.19.

At its last earnings call on April 13, Intel had forecast a second-quarter sales range of $7.6 billion to $8.2 billion, with a midpoint of $7.9 billion.

The current forecast -- with a midpoint even with the first quarter's $8.1 billion in sales -- is slightly better than the average sequential revenue decline of 2% seen at Intel over the past five years. Within that period, Intel's sequential growth has ranged from a 7% drop to a 4% rise.

Asked by an analyst whether Intel has finally "turned the corner" in its recently troubled flash business, CFO Andy Bryant replied on a conference call that it had. In January 2003, Intel had lost market share and angered customers by hiking flash prices. But in Thursday's call Bryant said Intel has "started to repair our relationships with our customers."

"I think we're starting to see a real change in that business rather than a one-time blip," he added, pointing out that Intel's flash business was also a little better than expected in the first quarter of 2004.

Intel also issued a gross margin outlook of between 60% and 61%. Previously it predicted a gross margin of 60%, plus or minus a couple of points.

Wall Street analysts were expecting 25 cents in earnings per share on revenue of $7.98 billion, according to Thomson First Call.