Intel the world's largest maker of computer chips this morning posted a 16 per cent rise in net profit helped by notebook computer demand, but production constraints prevented the results from exceeding expectations, and shares fell 4 per cent.
Net income in the second quarter rose to $2.03 billion, or 33 cents per diluted share, from $1.76 billion, or 27 cents per diluted share in the year-earlier quarter, and revenue rose to $9.2 billion from $8.0 billion.
In five of the seven prior quarters, the Santa Clara, California-based company had topped Wall Street hopes.
But supply constraints, even as Intel races to add factory capacity for more chips used to build personal computers ahead of the academic and year-end holiday buying seasons, limited the chip maker's ability to meet demand for its products.
"Right now demand is strong enough that I haven't been able to build up inventory," chief financial officer Andy Bryant said in an interview following the report. "The momentum of the first half appears to be continuing as we enter the third quarter. Demand is strong. The factories are full," he said.
But he added: "We're losing revenue we could have had if we had more capacity."
"This will likely be viewed as a disappointment given heightened expectations heading into the quarter," Smith Barney analyst Glen Yeung said of Intel revenue in a note to clients. Shares fell 4.4 per cent to $27.45 in after-hours trade on Inet.
At current levels, the stock has risen 17.2 per cent, making it one of the top-performing components of the Dow Jones index this year.
Intel raised its capital spending expectation for 2005 to approximately $5.9 billion, plus or minus $200 million, compared with the previous expectation of $5.4 billion to $5.8 billion, to support the higher expected demand.
The company is moving into mass production of advanced new 65 nanometer chips in the second half of the year. Earnings in the second quarter were boosted by a previously disclosed 2-cent-per-share tax-related gain.
Looking ahead, the company said it anticipated third-quarter revenue in a range between $9.6 billion and $10.2 billion. Analysts surveyed by Reuters Estimates had forecast third-quarter revenue of $9.77 billion on average, with predictions ranging from $9.45 billion to $10.30 billion.