Why Intel is a Likely Winner of Tech Recovery


intelchips.jpgDespite lingering fears of a second half economic slowdown, corporate spending on information technology is on an upswing. Forrester Research, in its most recent quarterly update, notes that during 2010, the IT market will grow 7.9 percent worldwide to $2.464 trillion. The U.S. IT market is expected to grow around 9.9 percent to $753 billion, thanks in part to a big upsurge in demand for computer equipment. Europe will grow by about two percent, down from previous forecast of five percent.

Computer hardware sales will grow 19.1 percent, “driven by the replacement of old PCs, servers, and storage equipment after the 2009 capital investment freeze,” Analyst Andrew Bartels notes. If such a forecast unfolds as outlined by Bartels, then Intel (s INTC) will be the likely winner, as most of the PCs and servers currently in demand are using its chips. Intel is already seeing the benefits of this upswing.

“Strong demand from corporate customers for our most advanced microprocessors helped Intel achieve the best quarter in the company’s 42-year history,” Paul Otellini noted in a press release accompanying its most recent quarterly earnings report. The company reported an operating income of $3.98 billion, net income of $2.89 billion and earnings per share of 51 cents. While its PC revenues were up only marginally — two percent sequentially to $7.84 billion — the biggest bump came from the data center group, which saw revenue jump 13 percent sequentially to $2.11 billion, with record server microprocessor revenue, the company said.

While it might not be making much headway in the mobile business, for now it seems Intel is doing well capitalizing on demand for servers. The Forrestor forecast only reinforces that reality.

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