Intel Earnings Preview: Cautious Market Leader

Intel reports earnings for the fiscal fourth quarter on Tuesday. The following is a summary of key developments and analyst opinion related to the period.

Intel Core 2 Duo Processor
Intel Core 2 Duo Processor

Overview: Chip companies are taking a cautious approach going into the new year as they wait to see if the U.S. economy will fall into a recession.

Intel had a 43 percent boost in profits in the third quarter, helped by strong demand and lower costs following a massive restructuring.

More Wall Street confidence followed in November when Intel unveiled its newest generation of processors. Its new technology fits up to 40 percent more transistors onto Intel chips.

Intel's latest-generation processor chips are at least six months ahead of competitor Advanced Micro Devices, according to analysts.

Intel topped off the quarter by unveiling its new Penryn laptop processors at the Consumer Electronics Show in Las Vegas. The processors use the same advanced technology Intel unveiled in November.

Chips for notebook computers continue to be one of the most successful and high-margin sectors.

By The Numbers: Analysts polled by Thomson Financial expect Intel to report profits of 40 cents a share on sales of $10.84 billion.

Analyst Take: Wachovia Capital Markets analyst David Wong said in a note to investors that Intel CEO Paul Otellini sees no sign of a global recession. Wong concluded from this that Intel has seen no major slowing of its business.

He said Intel is doing particularly well in the microprocessor market as AMD struggles to fix design problems.

He expects "essentially no competition" for Intel in the higher end of the microprocessor market, and said it is unlikely to see price pressure in this segment.

Wong said Intel was an attractive investment as it has a dominant position in the chip market. He also said the company's decision to cut costs and move away from low profit, nonessential businesses should help it improve its profit margins.

Friedman, Billings, Ramsey analyst Craig Berger said Intel was well positioned as notebook computer sales continue to take market share from desktop personal computers.

What's Ahead: Watch for New York Attorney General Andrew Cuomo's investigation of Intel for alleged unfair business practices. Cuomo is examining allegations that Intel urged clients to exclude AMD chips from their devices.

Stock Performance: Intel shares hit a 52-week high of $27.99 in early December, but they finished the quarter up only about 2 percent at $26.66. They finished Friday's trading at $21.99.