Intel trumps forecasts, bodes well for PC sector

Intel trumps forecasts, bodes well for PC sector

INTC盘后ER后，上涨1.19至18.02，远远超出主要阻力线17，盘后成交量15.2M，日成交量80.3M，总成交量95.5M。

* Q3 revenue, gross margin forecasts top estimates

* Says consumer PC demand improving, corporate still weak

* Intel shares jump 8 percent; drives up S&P futures (Adds details from conference call, analysts' comments)

By Alexei Oreskovic

SAN FRANCISCO, July 14 (Reuters) - Intel Corp's (INTC.O) quarterly results and outlook blew past Wall Street forecasts on better-than-expected consumer demand for PCs, especially in Asia, setting an auspicious tone for the technology sector.

Shares of Intel, the world's largest chipmaker, jumped 8 percent on the report, driving Standard & Poor's 500 stock index futures SPc1 sharply higher and bolstering technology shares such as arch rival Advanced Micro Devices Inc (AMD.N).

Intel projected third-quarter revenue at $8.1 billion to $8.9 billion, compared with analysts' average forecast of $7.8 billion, according to Reuters Estimates.

CFO Stacy Smith said fourth-quarter gross margins could scale the high end of a "normal" range -- which Intel defines as 50 to 60 percent -- due partly to declining production costs for new generations of chips and other factors.

Intel's strong showing came despite what it described as weak demand from the corporations that traditionally are big buyers of computer equipment, and comments by Intel executives that Microsoft's (MSFT.O) forthcoming Windows 7 operating system is unlikely to revive corporate spending this year.

"You have an $8 billion quarter with very little enterprise spending taking place," said Broadpoint Amtech analyst Doug Freedman. "The consumer is healthier than we expected."

Excluding charges for a European antitrust fine, Intel said it earned 18 cents a share in the second quarter, beating the average forecast of 8 cents according to Reuters Estimates.

Revenue in the three months ended June 27 was $8 billion, down 15 percent year-over-year, but well above the average $7.27 billion expected by analysts.

Smith told Reuters that computer markets were strengthening and there were "pockets of relative strength" in consumer PC markets, as well as in the Asia Pacific and in China.

The company forecast third-quarter gross margin at 53 percent, plus or minus 2 percentage points, an improvement from the second quarter's 51 percent.

"They guided gross margins for the third quarter of 53 percent and the whisper was 50 percent to 51 percent. A nice way to kick off earnings season for tech companies," said Patrick Wang, an analyst at Wedbush Morgan.

TECH SHARES UP

Intel posted a second-quarter net loss of $398 million, or 7 cents a share -- its first quarterly loss since 1986 -- after taking charges linked to a $1.45 billion fine imposed by European regulators, which ruled in May that Intel abused its market position to squeeze out AMD. Intel intends to appeal.

This time last year, Intel earned $1.6 billion in net income, or 28 cents a share.

Intel has felt the effects of the recession and a slowdown in IT spending, though Chief Executive Paul Otellini said in April that PC sales had "bottomed out" in the first quarter and that the industry was returning to seasonal business patterns.

Intel's microprocessors are used in more than three-quarters of the world's personal computers, so its results are a barometer for the global PC sector.

"This bodes well for the sector, which many believe looks inexpensive," said Steve Neimeth, a portfolio manager at SunAmerica Mutual fund. "It bodes well for many of the large-cap tech companies like IBM (IBM.N), Microsoft (MSFT.O) and Cisco (CSCO.O), which have correlation due to similarities in their end market."

AMD stock jumped 4 percent after-hours. Microsoft shares rose 3 percent, Cisco gained 2 percent and IBM rose 1 percent.

Executives warned that the corporate market remained weak, and Intel does not expect much change in the second half.

Many PC companies remain under pressure as the global recession reduces demand and a new generation of inexpensive netbook PCs replaces sales of more expensive machines.

On Monday, Dell Inc (DELL.O), the world's No. 2 PC maker, said its profit margins would decline modestly in the second quarter as demand has shifted to cheaper computers.

But Smith noted that Intel's Atom chip, designed for netbooks, is cannibalizing no more than a fifth of the sales of its lowest-end notebook processor, the Celeron. Intel said revenue from Atom processors and chipsets soared 65 percent from the first quarter to $362 million.

Sales of microprocessors for laptop PCs rose 16.7 percent sequentially, and Intel said shipments of server processors were better than expected.

Intel had stopped providing official forecasts in January, limiting its comments to internal revenue targets. Smith said the resumption of forecasts was a sign that visibility had improved as order rates become more predictable.

"Intel has a much stronger seasonal second half. So the fact that Q2 is better than Q1 clearly puts the worst behind Intel," said Broadpoint Amtech analyst Freedman.

Shares of Intel were trading at $18.06 after-hours, compared to their Nasdaq close of $16.83. The shares have risen roughly 38 percent from a 52-week low of $12.05 in February. (Reporting by Alexei Oreskovic; Additional reporting by Ritsuko Ando, Laura Isensee, Edward Krudy and Sue Zeidler; Editing by Tiffany Wu and Richard Chang, Gary Hill)

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Intel Gives Rosy Outlook as Sales Recover

Intel Corp. provided fresh evidence that PC sales are rebounding for some vendors, though the company's second-quarter results were marred by a rare loss due to a $1.45 billion antitrust fine.

The Silicon Valley chip giant posted revenue and profit margins for the period ended June 29 that were much stronger than the first quarter.

"While the global economic environment is still recovering, our customers signaled increased confidence" with their ordering patterns, said Intel Chief Executive Paul Otellini during a conference call Tuesday.

Intel projected that revenue would expand further in the current period, with additional improvements in profit margins.

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Market Insider: Intel Is a Bright Spot

Positive comments and a better-than-expected earnings report from tech bellwether Intel could capture the imagination of investors, who have been hoping tech will rescue the earnings season.

Intel [INTC  16.83    0.34  (+2.06%)   ] Tuesday was the first major tech to report, and its results will be used to handicap other tech names ahead of their reports. Wednesday is a quiet day for earnings, but Intel could help set the tone for technology shares. Excluding charges, Intel said its adjusted earnings amounted to $0.18 per share, well above the $0.08 per share expected by analysts.

The company's closely-watched margins slipped to 50.8 percent, but topped street estimates of 46 percent. The company said margins could improve to better than 55 percent in the second half. In a statement, CEO Paul Otellini said the company's results reflect improving conditions in the PC market. He said the company's 12 percent growth was the strongest second quarter sequential growth since 1988. The company also has "clear expectations for a seasonally stronger second half."

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Those are certainly encouraging words for a market that has been obsessed by a lack of guidance and is concerned that the economy's attempts to recover are sputtering. Intel reported a net loss of $398 million, or $0.07 per share, after a $1.45 billion charge, related to a European fine.

On the calendar for Wednesday are the consumer price index, at 8:30 a.m.; business inventories at 9:15 a.m. and the Fed's minutes and economic outlook at 2 p.m.

Goldman Sachs [GS  149.66    0.22  (+0.15%)   ] , as predicted, also reported better than expected earnings, ahead of Tuesday's opening bell. Goldman earned $4.93 per share, compared to the $3.39 expected by analysts. The stock market though was lackluster on thin volume, with the Dow up 27 at 8359; S&P 500 up 4 at 905, and the Nasdaq up 6 at 1799.

Financial stocks, which bolted higher Monday on an upgrade of Goldman by bearish analyst Meredith Whitney,  were among the worst performers Tuesday. Financials declined 0.3 percent. The best performers were the beneficiaries of the recently popular recovery trade. Consumer discretionary were the top sector, up 1.5 percent, while industrials and energy rose 1.2 percent.

Pete McCorry, who trades bank stocks at Keefe Bruyette, said investors are intentionally staying on the sidelines ahead of the major earnings reports. "The first conversations we've had, even thinking about normalized (bank) earnings were in the past quarter. These are pretty pivotal earnings," he said.

Earnings expected Wednesday include just a few major names, including Abbott Labs [ABT  46.49    0.34  (+0.74%)   ] , AMR [AMR  4.18    -0.10  (-2.34%)   ] and Gannett [GCI  3.49    0.17  (+5.12%)   ] . Traders will be looking ahead to the major financial companies reporting toward the end of the week, with JPMorgan [JPM  34.70    -0.01  (-0.03%)   ] Thursday and Citigroup [C  2.92    0.14  (+5.04%)   ] and Bank of America [BAC  12.91    -0.08  (-0.62%)   ] Friday.

Daniel Deming of Stutland Equities said the market's bias could be higher for the rest of the week because of options expirations Friday. "The expectation of the market participants is that the VIX is going to close July somewhere around 25ish. That's the activity we're seeing right now," said Deming, who trades the VIX at the CBOE. The VIX drifted lower Tuesday, on the heels of a sharp move down Monday that paralleled the stock market's rally.

The VIX is the Chicago Board of Options Exchange's volatility index and it is considered a measure of market fear. Deming said the stock market's behavior has been a surprise to traders who thought it would move lower after breaking key technical levels last week. "People were expecting it to pick up steam and sell off . Once it didn't culminate (Monday), we saw the VIX come in 10 percent," he said.

As stocks held gains Tuesday, a selling wave hit the Treasury market. Jefferies Treasury strategist John Spinello said the sell off was stronger than he had expected. The yield on the 10-year edged up to 3.445 percent, its highest yield since July 7. 

"You've got the stock-bond trade, where equities just lent to a lower bond market. You had the reverse of safe haven trade," said Spinello.

"I think the acceleration of the bond market move has to do with liquidation from somewhere," he said.

Treasury traders are focusing on the Fed's 2 p.m. release Wednesday to see what FOMC members discussed about quantitative easing at their last meeting. J.P. Morgan U.S. economist Michael Feroli said he expects little on quantitative easing but he does expect the Fed to make a slight upward revision to 2009 and 2010 growth.

"The folks in the bond market are still getting pretty antsy. I would suspect it doesn't sound too friendly on the asset purchase stuff ... not as friendly where they potentially discuss buying more," he said.

"I kind of get the sense they feel this way ... like almost like they think it's a bad mistake..so for that reason, I just kind of expect them to let the whole issue kind of die here and not keep the ball rolling," he said.

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Feroli said he would not be surprised to see the Fed adjust its unemployment forecast. The mid-point in the April projection was 9.4 percent, below the 9.5 percent rate reported for June. Feroli said his forecast is for 10 percent unemployment by the end of the year.

"The harder call is on inflation. We expert a modest upward revision to 2009, mostly on stronger -than-expected April data. In some of the more recent Fed-talk, concerns about deflation seem to be creeping back into the conversation," he wrote in a note. He pointed to a July 8 speech by Chicago Fed President Charles Evans who said  his views on inflation went from being balanced to skewed to the downside.

On Tuesday, Kansas City Fed President Thomas Hoenig said in an interview with Reuters that even in this climate, the long term threat of inflation should not be ignored.

The dollar, meanwhile, gained 0.4 percent to $1.3939 against the euro Tuesday. It gained 0.5 percent against the yen. Oil was barely changed ahead of Wednesday morning inventory data.