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CNBC ON DIGG

Intel Blows Past Earnings

Published: Tuesday, 14 Jul 2009 | 4:43 PM ET

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By: Jim Goldman
Silicon Valley Bureau Chief

Impressive, any which way you slice it: Intel resoundingly beats the Street for the second straight quarter amid albeit dampened expectations, but this is far more than merely a case of "less bad news."

First things first. Intel [INTC Loading... () ] essentially released two earnings reports today, extremely unusual for the company, but that's what happens when you're facing a $1.45 billion fine from European Union regulators. For that reason, Intel released both a GAAP and non-GAAP earnings per share figure so that investors would get a better idea of how the company truly performed on the quarter.

On a non-GAAP basis, Intel posted 18 cents a share, or a dime better than analysts expected, and a dime better than what the company reported for its first fiscal quarter. That news came on dramatically better than expected $8 billion in revenue. Analysts were anticipating $7.3 billion.

Without that one-time charge accounting for the EU fine, Intel would've reported a 7 cent a share loss. So the secondary information on a non-GAAP basis is particularly useful since that loss, on a GAAP basis would have been Intel's first in something like 23 years.

Further, gross margins become the true star of this story: Intel reported 51 percent in gross margins compared to the 45 percent consensus. And looking into the third quarter, Intel has reverted to once again offering guidance, expecting gross margins to increase to 53 percent. That's significant since there have been so many concerns that a significant shift to lower cost laptop computers called netbooks would substantially hurt Intel's margins. That appears not to be the case.

Also on guidance, Intel says it expects about $8.5 billion in revenue for its third quarter, plus or minus $400 million, which is also substantially ahead of the $7.8 billion revenue consensus. The one-two punch of good revenue and margin guidance could go a long way toward reinvigorating a tech sector already begin to sew the seeds of recovery. Intel seems to be in far better shape than analysts anticipated, with Broadpoint AmTech's Doug Freedman saying, "Across the board, it looks like a very solid result." Patrick Wang at Wedbush Morgan says, "Initial take is good and good…a nice way to kick off earnings season for tech companies."