Tech Check

Yahoo, Intel Kick Off Important Tech Week

Talk about a tale of two companies: Intel  soars, and Yahoo is just plain soar. Both companies report after the bell today and investors are expecting decidedly different tones.For Intel, these are heady times. The simple numbers are 19 cents a share on $8.54 Billion in revenue. But the focus for this company will be on guidance.

There's a conventional wisdom on the Street right now that Intel's second half surge is actually coming a quarter early, and the true reflection of that will come in the company's gross margins--expected to be north of 48%, and likely higher than 50%. Investors shouldn't necessarily be surprised that margins are on the mend, following the comments I got from my interview with CFO Andy Bryant after last quarter's earnings announcement. Not that he typically sandbags the Street, but he was far more optimistic than normal and that got people excited about a latter-2007 turnaround.

The news comes from a much better-than-expected PC industry right now, thanks to Microsoft's Vistafinally gaining traction. Intel's Third Quarter, which includes back-to-school sales, is usually the first indication of strength for the company. Q2 is normally pretty slow. But not this time around. Investors are clearly looking for good news and good guidance, turning Intel into the Dow's best performing stock during the second quarter.

"Microprocessors are being cut over 40% on the high end side, and on the low end side, there about 10-15% in cuts. Every time there is a significant price cut heading into the back to school sales, it will generate positive unit elasticity," Jefferies John Lau tells me. "The good news is continuing to flow for Intel and the company continues to benefit from the Vista upgrade. Intel is the leader you want to play for the pc sector."

Even as rival AMD , toiling on the low-end, continues to fend for Intel's scraps. AMD reports Thursday.

(Look for my one-on-one interview with Andy Bryant which should post in its entirety on this blog later today.)

For Yahoo,this is truly a crossroads. Terry Semel, formerly the highest paid CEO in Silicon Valley, is out. He's replaced by co-founder and new CEO Jerry Yang who presides over his first quarterly earnings. The numbers the Street anticipates: 11 cents on $1.12 Billion. But the bigger news will come from any color the company offers on the new search algorhythm Panama.

Is this software doing what it is supposed to? Citigroup's Mark Mahaney seems to think so: "People want to hear from Yang conviction that Project Panama is truly working in terms of improving Yahoo's search engine. At the beginning of the year, there was a lot of hope and a lot of conviction there that Panama was working.; Now there is a lot of uncertainty about it. We believe it is working, but investors need to hear that again from Yang."

The question is, will they? Yahoo shares were crushed last year, off 40%. This year, they're up about 4%. But Google, which reports Thursday, is growing six times faster and trades at a cheaper multiple. Yahoo has an uphill climb technologically and financially, trying to convince investors the company is still a good place to park their money. That's a tough proposition. No pressure, Mr. Yang, but Yahoo's conference call later today will be the internet's version of a Bernanke speech: investors will be hanging on every word, not just how they'll dictate Yahoo's upcoming quarter, but what may be coming from Google the day after tomorow.

Questions?  Comments?