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Intel: As Long As Numbers Add Up, Worst May Be Behind

Intel's headquarters in Santa Clara, California.
Paul Sakuma
Intel's headquarters in Santa Clara, California.

With Intel, the bad news is already baked in, and that's leading many analysts to expect good things from the company at the close today.

Funny how when a company lowers its own expectations, and is now expected to at least meet them that it translates into "good news" for Wall Street.

But such is the case with the new world order for investors. These have been raucous times for Intel shareholders. Made more unnerving last week with the big warning from rival Advanced Micro Devices that crushed that company's stock, led to layoffs and the departure of the company's chief technology officer. But there are many out there that suggest AMD's problems are not industry wide, but instead caused by Intel, and that could bode well today for the world's largest chipmaker.

From quarter to quarter, Intel's fortunes are made and lost by its gross margins. In January, the company disclosed that it would lower margin outlook from 56 percent to 54 percent. That was crushing news considering the company had projected stability in that key metric. The company blamed a glut of memory chips on the market, and its declarations that PC and mobile demand remained strong got lost in the noise. That too could represent an opportunity since those categories represent that vast majority of Intel revenue.

Analysts today are looking for 25 cents a share on $9.63 billion, and that gross margin of 54 percent. As always, investors will be paying close attention to guidance as well, with expectations hovering around 28 cents a share on $9.3 billion for the June quarter; and $1.29 on just shy of $40 billion for all of 2008.

To quantify just how much optimism there is around these shares, look no further than WhisperNumber.com, which reports a whisper of 28 cents, or 3 cents better than the Street. That's a healthy whisper and not your typical one or two pennies. Whisper also says that Intel has beaten in 16 quarters, but met or missed in 18 quarters, so bet accordingly. It's just that after the volatility of the last quarter, Intel investors may not be in a betting mood, choosing instead to hold back and wait for things to turnaround more strongly.

Shares started the quarter at $23, dipped to a 52-week low of $18 and change and have been recovering recently. If Intel can beat, and base the beat on stronger than anticipated margins, this stock could see a break-out reaction. But if Intel can't measure up to even its revised-lower expectations, look out Chicken Little.

But there's little chance of that, at least if you believe the analysts following the issue. Intel seems to be on track to release a new set of mobile chips, the industry is going mobile, Intel is positioned well, and longer term, things seem rosy.

And with Intel's bad memory news already on the table, and global PC sales stable, despite Dell's problems (though as Dell moves away from troubled AMD and back into an Intel-only mode, that could end up being a positive for Intel as well if the company can turn itself around), the worst may be behind the company. As long as its numbers today measure up.

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