Intel Signals All Is Well

Intel (INTC) has been quite silent since last earnings, and after the round of semiconductor and chip warnings in December Wall Street is interpreting that the company isn’t going to have any major issues with the quarter.  Street estimates on a preliminary basis before last minute changes are $0.25 EPS and $9.45 Billion revenues; based on recent bullish calls you could expect a whisper earnings number of $0.26 & around $9.55-$9.6 Billion. INTC reports January 16 after the close.

Over the last 3 months the stock has actually been mostly flat and in a range of just above $20 on the low-end in December and up as high as almost $22.50 in November.  In recent days Banc of America has reiterated a Buy rating with a $28 target and just this morning Deutsche Bank did the same reiteration of a Buy rating, although Bank of America’s ongoing research was the most compelling that it will be in the higher-end of the range.  Sanford Bernstein and Credit Suisse were cautious last week, so don’t think it is only one-sided.  Options traders as of this mornings 1.5% gain are only factoring in a move of essentially 1.5% to 2% in either direction ahead of earnings, but that may be different by earnings day.

Outside of the move from Dual-Core into Quad-Core and then other speculation suggesting we’ll have 8-core and 16-core processors by the end of the year, the talk of its flash unit spin-out and new wireless cards and WiMax initiatives is really overshadowed by the launch of Windows Vista.  The AMD threat is now known and very quantifiable.  So now it really seems to boil down to one single point: If you believe that the Windows Vista launch is going to be monumental and a strong upgrade catalyst, then Intel should do quite well.  If not, then lower share prices are a given.  I am optimistic ahead of the launch and therefore have great expectations for the coming quarter, but that’s my opinion; some are thinking sell-throughs are not strong enough yet to merit being positive.  My answer to that is that this could miss by a quarter or even two, but in a year from now if you or your business aren’t running on a quad-core processor and you might as well be turning in the plasma for an old CRT black & white TV with wood panels.

You can assume that forward Q1 2007 and Fiscal 2007 estimates will see some real changes either way after the report, but here are some rough forward expectations from the street: $0.23/$8.9 Billion for Q1 and Fiscal 2007 $1.14 & $37.8 Billion.

Companies are supposed to be in a quiet-period by this time, so if the company warns this late in the game or if they come out with substantially lower revenues next week then they would be at risk of having credibility issues because of their size.

Jon C. Ogg
January 11, 2006