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Intel Strikes a High Note

Thursday, 14 Jan 2010 | 4:57 PM ET
CNBC.com

Optimism into Intel's fourth quarter earnings report tonight was already high. Just look at the 2 percent move ahead of the numbers, even as Intel sat at a 16-month high, as a key example. Volume was enormous today, around 130 million shares for a stock that normally trades at less than half that.

And despite all that froth, Intel delivered a blockbuster.

The company reported 40 cents a share in GAAP earnings, a dime better than consensus, and a whopping 7 cents better than even the whisper number that I saw from the folks at WhisperNumber.com. (My colleague and CNBC Stocks Editor Matt Nesto pointed out to me that his loose math suggested that Intel's 12 percent tax accounts for about a nickel of upside in EPS since Intel's own forecast anticipated a 20 percent tax rate. Still, even if you wanted to back out that nickel, the company still beat on the bottomline, even beating the whisper.)

The huge bottomline beat comes on arguably the more important metric of Intel's topline performance: The company reported $10.6 billion against the $10.2 billion anticipated.

The headline on Intel's earnings release borders on eye-popping: with $2.3 billion in net income during the fourth quarter, Intel crowed that net income grew 875 percent year over year. And no, that's not a typo.

The company's gross margin was also impressive at 65 percent, a level the company hasn't seen since 2000. The Street expected 60 percent. In fact, margins are so strong that Intel is now projecting on order of 61 percent for all of 2010, and that would be a record year-long margin plateau for the company.

Looking ahead to the first quarter and full year, the good news gets even better for those long in Intel shares. The company looking for $9.7 billion in revenue, far better than the $9.347 billion analysts expected. For the quarter, Intel expects 61 percent in gross margins, versus the 59.2 percent anticipated. That's also significant since Wall Street expected a seasonal sequential gross margin dip in the first quarter. That is clearly not the case.

Broadpoint AmTech's Doug Freedman says he's encouraged by the "low capital spending and the projection that gross margin would continue to operate within a very tight range." He adds that the company's already bullish gross margin projections may prove "conservative."

David Kanter at Real World Technologies says "it's definitely positive for the overall tech market."

Intel's in the books. And it's a great story.

Next week? IBM Tuesday, eBay Wednesday and Google Thursday, among many others. The pressure's on all of them to keep this kind of tech momentum going. Intel is certainly doing its part to beat the drum that "recovery" isn't merely on the way. It's here.

Questions? Comments? TechCheck@cnbc.com

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