July 17 (Bloomberg) -- Intel Corp., the world's largest computer-chip maker, may report its first sales gain in six quarters today, helped by rising demand for laptops.
Revenue may have increased 7 percent to $8.54 billion in the second quarter, according to the average of 24 estimates in a Bloomberg survey of analysts. Net income probably advanced 26 percent to $1.12 billion, or 20 cents a share, from $885 million, or 15 cents, a year earlier, the survey showed.
Intel shares surged 24 percent in the quarter after Chief Executive Officer Paul Otellini won back market share lost last year to Advanced Micro Devices Inc. Intel didn't have to cut prices as much as in previous quarters, allowing the Santa Clara, California-based company to wring more profit from its chips as consumers snapped up notebook personal computers.
``Clearly business has bottomed for Intel,'' said Christopher Danely, an analyst at JPMorgan Chase & Co. in San Francisco. He rates the stock ``overweight'' and said he doesn't own it. ``The PC space is better than expected.''
Danely, UBS AG analyst Uche Orji and Bear Stearns Cos.' Gurinder Kalra said the chipmaker probably beat the average sales estimate. Intel reports results after the close of regular Nasdaq Stock Market trading today. Spokesman Tom Beermann said the company wouldn't comment for this story.
Shares of Intel rose 21 cents to $26.16 at 10:19 a.m. New York time in Nasdaq trading. Before today, the stock was the fourth-best performer on the Dow Jones Industrial Average this year, gaining 28 percent, after being the worst stock in the index in 2006, when earnings fell 42 percent.
Twenty-five analysts tracked by Bloomberg recommend buying Intel's stock, up from 19 with ``buy'' ratings three months ago.
Otellini, 56, revived the company's market share from an 11- year low at the end of the fourth quarter. He replaced the 6- year-old Pentium 4 design with a new chip that is faster and uses less power.
PC demand is climbing, helped by demand in countries such as China. Worldwide PC shipments may rise 11 percent to 257.1 million this year from a year ago, researcher Gartner Inc. in Stamford, Connecticut, reported last month.
To keep the shares rising, Orji said, Intel needs to improve profitability. In April, the company said gross margin, or the percentage of sales remaining after production costs, would be about 48 percent in the second quarter. Intel's gross margin has averaged 55 percent since 2002.
``We need to see Intel indicate that gross margins are expanding aggressively,'' said Orji, based in New York. He predicts the stock will rise to $30 in 12 months. ``That is what will be the next catalyst.''
In May, Otellini told investors in New York that Intel is on course to meet its target of annual cost savings of $3 billion in 2008. The company has cut more than 10,000 jobs, or 9.8 percent of its workforce, since September, reduced spending on new plants, and sold unprofitable businesses.
Advanced Micro's stumbles contributed to Intel's rebound in the $33 billion microprocessor market. Sunnyvale, California- based Advanced Micro was late introducing Barcelona, its latest server chip, and the processor is slower than expected, Danely said.
The company ``plans to steadily increase the performance of these next-generation processors,'' Advanced Micro spokesman John Taylor said in an e-mail today. ``We stand by our performance projections.''
Measured by shipments, Intel had 81 percent of the PC processor market at the end of the first quarter, a gain from 74 percent at the end of last year, Cave Creek, Arizona-based Mercury Research said. Advanced Micro slumped to 19 percent, its first time at less than 20 percent since 2005.
Advanced Micro had a loss of $611 million the first quarter and analysts predict the company won't be profitable this year or next. That means the chipmaker may not be able to continue the price cuts that helped the company win sales last year and trimmed Intel's margins, analysts said.
Average selling prices for microprocessors dropped to $117 in the first quarter from more than $130 in 2005, according to Mercury Research.
``Prices have become more stable,'' said Orji, who doesn't own Intel shares. ``The price war has been sucking the energy from the sector.''
Shares of Advanced Micro, which reports results July 19, fell 9 cents to $15.63 in New York Stock Exchange composite trading, and had declined 23 percent this year before today.
I bought a bucket-full of Intel stock in 2006