Intel Getting Some Visibility: Good News, Bad News (INTC)

Intel Corp. (NASDAQ: INTC) CEO Paul Otellini presented some optimistic data today at a Goldman Sachs conference.  The company did not give formal guidance, but to the surprise of many it mentioned the improving “predictability” in the current environment.

Otellini said that the company believes the technology market is becoming more predictable as PC makers and sellers are adjusting to lower demand.  The company had already warned in its last earnings report that when growth resumes it will be at lower levels.

Otellini also said  people are trying to figure out how to work out of the global economic slump.   He also noted that this current climate is different than the downturn in the semiconductor sector after the tech bubble burst in 2000.  What is interesting is that Otellini said that the recent downturn caught many people in the industry by surprise with massive inventory levels and that it took time to work through them.

But the takeaway is slightly different than our notion that the PC is now an appliance like the toaster.  Otellini believes that the PC has become an essential in life and that demand does have a floor that limits how far it can fall.

Intel closed up only 2.3% at $13.02.  Its 52-week trading range is $12.05 to $25.29.  The company does not yet seem to be at the point that it can draw a line in the sand and say this is the worst or that things have bottomed and are about to recover.  This bottoming out could take quite some time.  The demand for netbooks and notebooks seems to be creating a cap on how much of the high-end market will really drive the results.

The good news is that you have to have a processor, or actually multi-core processors, inside your PC whether you buy in the low-end or the high-end.  And it seems that PC’s are becoming simple replacement devices for the mainstream.  And the amount of processor power you can get in the sub-$500 PC market has become almost mind-boggling.

Our guess is that if Intel would have said “quote unquote” that the PC sector or processor has bottomed, then you would have seen a much larger jump.  Unfortunately, that isn’t what the PC-makers themselves are willing to say.  So far they won’t even say anything close to that.

Jon C. Ogg
February 25, 2009