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CNBC Silicon Valley Bureau Chief
Editor's Note: this post originally appeared on CNBC.com Tuesday, October 13
Intel's [INTC
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] report was blockbuster, plain and simple, and the key takeaway is that the news isn't merely "less bad," but finally "good."
The world's largest chipmaker got a whole lot larger, and a whole lot faster than Wall Street expected. Its 33 cents a share in profit was a nickel better than consensus and 2 cents better than earningswhisper.com expected. The $9.4 billion blew away the $9.04 billion consensus. And for a company that beats expectations 59 percent of the time, no time might have been more important than this one.
Make no mistake: Intel didn't bank sales at the expense of margins. The company's 58 percent gross margin was much better than the 54.6 percent expected, and the 51 percent this company reported in its previous quarter.
And as if the good news wasn't good enough, Intel's guidance for the fourth quarter is stellar: $10.1 billion versus a whisper of $9.9 billion, and a 62 percent gross margin. The company says a better-than-expected back to school shopping season gives it much better visibility into the seasonally strong fourth quarter. And it looks good, thanks to a stronger consumer (when did you hear that last?) and new strength from China.
Stacy Smith, Intel's chief financial officer, told me after earnings were released that enterprise customers still seemed weak, but that may because they're putting off purchases until Microsoft's Windows 7 is released next week.
Intel shares were halted for about half an hour, and when they re-opened, they promptly tacked on a 5 percent rally. But other tech stocks didn't wait: AMD, ASML, Marvel, Apple, Dell, Altera. They all jumped on Intel's report.
Smith wasn't quite giddy, but he was close. Optimism reigns supreme as the Atom microprocessor continues to see market traction and the netbook trend only expands. That's good for Intel, which continues to push innovation and drive the industry toward smaller and smaller chips that use less and less power.
The company did say that full year capex spending would decline to $4.5 billion, or $200 million below what was originally expected, but big chip equipment companies like Applied Materials didn't seem to react negatively.
Intel shares were up 38 percent year to date, but the company's rally has really lagged the even bigger gains some of its contemporaries have already enjoyed. Still, some analysts worried that the rally was too much too soon.
Guess not! Watch for price targets at or north of $25 on Wednesday. I wrote that Intel might be poised for a break-out. That break-out may finally be here.
Questions? Comments?
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