Intel Earnings Preview from

Tuesday, April 15, 2008

Intel Earnings Preview (20.84 +0.15) -Update-

Intel (INTC) is set to report Q1 results after the close tonight with a conference call following at 5:30 ET. Current First Call consensus estimates are for EPS of $0.25 on revs of $9.63 bln... Guidance: In its Q4 earnings report, the company issued in-line Q1 revenue guidance of $9.4-$10.0 bln. On 3/3, INTC lowered its Q1 gross margin forecast to 54%, compared to previous forecast of 56%, due to lower than expected prices for NAND memory chips. On 3/5, at its Analyst Day, the company said NAND price erosion is at 54% in the qtr, while they were expecting around 27%. However, INTC also said the PC industry still looks solid, forecasting low double-digit growth rates... Analyst Expectations: Analysts are generally expecting the company to report in-line to a slight miss. JMP believes any macro-related PC server industry weakness may be offset by a richer product mix with quad-core server and desktop chips. However, UBS lowered their Q1 sales estimate by 2% based on recent checks, industry data, and macro weakness... Recent Earnings History: 4Q07 (1/15): INTC missed EPS consensus by $0.02 and missed on revs, while guiding Q1 revs in-line. The stock sold off sharply the next day, closing lower by 12%; 3Q07 (10/16): INTC beat EPS consensus by a penny and beat on revs, while guiding Q4 revs above consensus. The stock closed higher by ~5% the following day; 2Q07 (7/17): INTC reports EPS in-line and beats on revs while issuing in-line Q3 rev guidance. The stock closed lower by ~5% the next day; 1Q07 (4/17): INTC reports Q1 EPS in-line and missed on revs while guiding Q2 revs below consensus. The stock closed marginally higher the next day... Areas of Focus: 1) Revenue, Margin, Capex Guidance: Historically, INTC issues revenue, GM, and capex guidance for the upcoming qtr. Going back to 1Q07, INTC reported revs of $8.85 bln, and guided 2Q07 revs to $8.2-$8.8 bln, a 3-4% sequential decline at the mid-point. Market participants will be looking for similar guidance at least. Current street expectations for Q2 GM stands at 54.9%, and at 56% for FY08. Capex street expectations for FY08 are $5.2 bln. INTC's guidance will be analyzed by the broader markets as an overall barometer of the overall health in the IT sector; 2) NAND Pricing Environment: On 3/3, INTC lowered its Q1 gross margin guidance specifically due to weak NAND pricing. Of significant interest will be whether the company has seen further deterioration, a stabilization, or any improvement; 3) PC Demand: INTC's expectation for PC growth is at 11%. On 3/3, INTC stated that overall PC demand remained strong. A reaffirming of this outlook would be deemed a positive for INTC; 4) Competitive Landscape: Intel's primary competitor, Advanced Micro (AMD), continues its struggles, confirmed by its negative pre-announcement on 4/7. This may also suggest further share gains from INTC at AMD's expense. However, AMD is in the process of re-launching Barcelona, which could have a negative impact on INTC's Q2 rev outlook... Secondary Plays: AMD, TXN, BRCM, QCOM, DELL... Technical Levels of Interest: Click here for INTC chart. (Length of the horizontal lines corresponds with the strength of the level.) (PVIEW)