Top chipmaker Intel Corporation posted earnings confirming the PC industry is alive and said sales would accelerate in the second half (H2) of the year with a powerful new PC processor. Intel has reported quarterly revenue of $12.9 billion, operating income of $3.8 billion, net income of $2.7 billion and EPS of $0.53. The company generated approximately $3.0 billion in cash from operations, paid dividends of $1.0 billion and used $1.5 billion to repurchase stock. “The first quarter was a solid start to what’s expected to be another growth year for Intel,” said Paul Otellini, Intel president and CEO. “In the second quarter we’ll see the first Intel-based smartphones in the market, ship products based on 22nm tri-gate technology in high volume, and accelerate the ramp of our best server product ever, providing a tremendous foundation for growth in 2012 and beyond.” In a first-quarter earnings report that did not inspire investors to push Intel’s recently high-flying stock further, the company also said costs associated with ramping up new production lines would hurt gross margins more than expected. “It’s not that they disappointed, they just didn’t give us the bull case. In previous quarters they blew the numbers out of the water,” said Patrick Wang, an analyst at Evercore Partners. The long-time technology bellwether is ramping up production of its newest PC processor, codenamed Ivy Bridge, which is expected to drive sales later this year and power a new crop of super-thin laptops dubbed ‘ultrabooks’. But the costs of upgrading the factories where the chips are being made is temporarily hurting margins, Chief Financial Officer Stacy Smith told a conference call. That was bad news to Wall Street, which has pushed shares of Intel 17 per cent higher so far this year. “They had strong execution for the most part, and in-line expectations for the PC market. But from a investor standpoint you have a multi-year high stock price, very much priced for perfection. That gross margin guidance, while understandable, was not perfection,” said Cody Acree, an analyst at Williams Financial Group. Intel said non-GAAP gross margins in the second quarter would be 62 per cent, plus or minus 2 per centage points, down from 64 per cent in the first quarter. Intel’s full-year gross margin forecast of 64 per cent was unchanged. Shaky economies in Europe and the United States, a growing consumer preference for tablets, and a recent shortage of hard drives due to flooding in Thailand last year have taken a toll on the PC industry. Demand in China and other emerging economies has helped sustain growth, and CFO Smith said business would pick up more as the industry recovers further from the hard-drive shortage and PC manufacturers replenish low component inventories. “As we ramp Ivy Bridge and people gear up for these really capable ultrabook sales in the last half of the year, you’ll start to see them refilling their pipelines with new products in the back half of this year,” Smith told Reuters. Intel is heavily promoting ultrabooks, which it hopes can stand up to the likes of Apple Inc’s Macbook Air, with some of the technological chic the iPad and other tablets epitomize. Some investors are concerned that expensive components used in them, like solid-state drives, make them too pricey for many consumers. Wang and other analysts speculate Intel may have to sacrifice profit margins on sales of its processors to help make ultrabooks affordable. Intel says manufacturers are finding ways to bring down costs of ultrabooks, and CEO Paul Otellini told analysts on the call he was confident of the chipmaker’s previous prediction the new light-weight PCs would account for 40 per cent of all notebook sales by the end of the year.