Intel's Rising Tide
I don't think you can over-estimate the significance of Intel's revenue expectation revision this morning: The new mid-point of $9 billion is a half billion dollars more than the $8.55 billion the company originally anticipated.
Following the Dell report last night, broader tech might have finally turned the corner from "less bad news" to actual "good news."
But even more important than the revenue increase is Intel's expectation of even higher margins. Why is that significant? Intel surprised some analysts with its second quarter report because gross margins were actually better than expected, and the company's margin outlook was equally rosy. That performance comes in the wake of the increasingly popular, low cost, low margin netbooks. Intel CFO Stacey Smith told me then that Intel was pleased with the margin support it was able to maintain with its hot-selling Atom microprocessor.
Yet even as netbooks gain in momentum, Intel seems able to expand its margins even further and on the Dell conference call last night we got a hint as to why. Michael Dell says a "pretty powerful product cycle" is on the way, juiced in part by Intel's new Nehalem chip, which is higher cost and higher margin, and signals new strength among consumer shoppers, and even enterprise customers who might be more willing than we thought to shell out bigger bucks for a more powerful machine.
The Dell news was good, but the Intel announcement today only extends what was already a burgeoning tech rally. We're seeing it in Intel, Dell, Microsoft , Apple , Cisco , Hewlett-Packard and many others. The news signals a rising tide for tech.
Not a tsunami, but a rising tide, and I suspect choosy tech investors who've been sitting on the beach all this time might be getting up to dip their toes in that water.
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