Intel's fourth quarter saw much better results than last year - $2.5 billion in operating profit and $2.3 billion in net income. The PC market has recovered nicely, it says with microprocessor revenue excluding Atom growing 42% since the market bottomed in the first quarter.

In the same time period, Atom microprocessors and associated chip sets have grown to $438 million in revenue in the fourth quarter and $1.4 billion for the year. Fourth quarter gross margin benefited from lower inventory write-offs, improving costs and new products as it sold the first products manufactured on the 32 nm process technology.

For 2009 the gross margin was 56% including a 20 point increase from Q1 to Q4. For 2010 Intel is forecasting continued strong gross margin with the midpoint of the annual forecast at 61%.
With average selling prices staying up in Q4, Intel predicts another good year, but sees prices falling eventually.

Chief Financial Office Stacy Smith says: "From an overall average selling price standpoint for 2010 we are predicting kind of a normal decline year-over-year. Keep in mind we have lots of things that go up and down. We will have a rich mix in the beginning of enterprise coming in but at the end of the day we do bring pricing down because we see unit growth potential in the consumer segment of the market and emerging markets. The price comes down, we drive unit growth with that and that ends up driving incremental gross margin dollars."

But Intel is looking for continuing gains as the PC market recovers, and some interest returning in servers. CEO Paul Otellini says "We are building into our number set a modest recovery of corporate purchases of PCs. That is we are not building in anything extraordinary out of that. Just sort of normal return to deployment as the evaluation cycles for the new hardware and Windows 7 gets completed."

"2009 was a funny year. The first half of the year the lights had gone off. What we saw over the course of the year was growth particularly in notebooks and netbooks around consumer purchases. This was not a robust year for corporate purchases."

What Intel is benefiting from in the second half of the year and thinks will continue to benefit from throughout this year is the "extraordinary return on investment" that is incurred by deploying new server technologies, he says. "As we deploy the new Xeon products out [the ROI] is 15 and 20 to 1. So we think that is compelling. The power conservation associated with that is compelling and it is one of the things that gives us optimism independent of PC refresh in the enterprise for 2010."