SAN FRANCISCO (REUTERS) - Intel Corp's third-quarter results modestly beat expectations on Tuesday, but its current-quarter revenue outlook fell short as tablets continued to grow more popular at the expense of personal computers (PC) largely powered by the chipmaker.
Intel is betting that its new Haswell PC processor with improved battery life will boost sales for the rest of the year, beyond the typically strong third quarter when PC manufacturers buy chips in anticipation of holiday demand.
With consumers increasingly favouring tablets and smartphones, Intel is wrestling with a slowdown in its core PC market while trying to make inroads in low-power mobile devices.
The world's top chipmaker said on Tuesday its gross margin in the third quarter was 62.4 per cent, and it forecast 61 per cent for the fourth quarter. Analysts had expected 60.92 per cent for the third quarter and 60.98 per cent for the fourth quarter.
The resilient gross margins suggest Intel is not trimming its output ahead of upcoming new processors, risking a future inventory imbalance, said Evercore analyst Patrick Wang.
"It doesn't look like they're taking any cut in utilisation to burn off inventory," Mr Wang said. "This could mean there's still a bit of a problem down the road."
Intel also trimmed its 2013 capital expenditure target to US$10.8 billion (S$13 billion), plus or minus US$300 million, from US$11 billion, plus or minus US$500 million.
Since taking the helm in May, chief executive Brian Krzanich has pushed to improve Intel's offering of chips for mobile devices. It recently announced a line-up of ultra-small chips for wearable devices, which are growing more popular.
Intel dominates the PC industry but it was slow to adapt its chips for low-power mobile gadgets like smartphones and tablets.
Mr Krzanich has promised Intel's new Bay Trail mobile chip would find its way into a slew of tablets, but it is still unclear how much progress is being made and how much those mobile chips, which sell for less than Intel's latest PC chips, may affect its gross margins.
Intel posted net earnings of US$2.95 billion, or 58 US cents a share, compared to US$2.97 billion, or 58 US cents share, in the year-ago quarter. Analysts had expected earnings per share of 53 US cents, according to Thomson Reuters I/B/E/S.
Revenue was US$13.48 billion, barely changed from US$13.46 billion in the year-ago quarter. Intel forecast revenue of US$13.7 billion, plus or minus US$500 million for the current fourth quarter.
Analysts had expected US$13.463 billion in revenue for the third quarter and US$14.004 billion for the fourth quarter.
Shares of Intel were up 0.34 per cent in extended trade after closing down 0.26 per cent at US$23.39 on Nasdaq.