Intel Earnings Run, Data Center Growth is Key Driver (INTC)

Intel Corporation (NASDAQ: INTC) reported its fourth quarter and year-end results after the close.  The fourth quarter earnings were up 7% to $0.59 EPS and it reported an 8% sales gain to $11.46 billion in revenues.  Thomson Reuters had estimates of $0.53 EPS and $11.37 billion in revenues.  Gross margin came in at 67.5%, above our expectations of 67%.

For guidance, Intel noted that it sees revenues of $11.5 billion, plus or minus $400 million and it sees margin at 64% plus or minus a couple points. Thomson Reuters had estimates ahead of $0.44 EPS and $10.71 billion in revenues.  For the year, Intel is showing that it expects gross margin to be 65% plus or minus a few percentage points.

One issue was that its tax rate in Q4 was 24%, which was far lower than the 31% expected previously because of a retroactive reinstatement of the R&D tax credit.  Intel did still claim that its average selling price for microprocessors was up slightly on a sequential quarter basis.

The biggest issue for Intel was not the quarter.  It is the impact of smartphones and tablets, which until later in 2011 will not offer much business to Intel.  PC client group revenue was flat along with its other architecture group but its Data Center Group saw 15% gains.

Shares closed down only $0.01 today at $21.29, and the 52-week trading range is $17.60 to $24.37.  The after-hours trading reaction shows that Intel shares are trading up about 1% at $21.51 after the close.  If this gain remains this small, then it is even a smaller move than the small move we used in options to anticipate the price change.

JON C. OGG