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Chipzilla's Q2 sets new record

But vulture capital gains hide chip woes

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Chip giant Intel turned in revenues of $8.3 billion for its second quarter with profits of $3.5 billion, but the figures are somewhat blurred because it reaped the reward of its investment portfolio.

Intel's Capital division contributed significantly to the bottom line in the quarter, a trend which first started to appear in the last two quarters.

Company executives now boast that the firm is one of the biggest venture capitalist outfits in the world, with Cisco also sporting a significant investment portfolio.

However, Intel's CEO, Craig Barrett, said that demand for microprocessors, flash memory and silicon for the networking market remained strong. The move to 0.18 micron technology will reap benefits in the second half of this year, he added.

He said that Itanium systems will start to yield some revenues towards the end of this year. It has been an open secret for some time that many PC vendors, including Hewlett-Packard and Compaq, will not realistically start to ship such systems until October of this year.

And Intel still knows how to knock out a margin. Barrett said that he expects gross margins during Q3 to be as much as 64 per cent, even given its expensive replacement scheme for i820 motherboards which use SDRAM.

Chipset sales were down from Q1, along with motherboard sales. This reflects some disenchantment with Intel's strategy on the i820 and the BX chipsets. Earlier this quarter, Intel more or less suspended sales of its boxed microprocessors while it attended to its OEM customers.

But sales of switches, NICs, and microcontrollers held steady, with unit shipments of Internet servers up from Q1. ®

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