Intel Calls The Bottom


It's not often the CEO's comments can overshadow an entire earnings report, but that's what might be happening with Intel and the company's first quarter report.

The company reported 11 cents a share in earnings, far out-pacing the 3 cents that Wall Street was anticipating, on better than $7.14 billion, ahead of the $6.98 billion analysts were expecting.

Gross margins also beat expectations, coming in at 46 percent instead of the 43.5 percent anticipated.

But the real news is what Paul Otellini had to say about the overall PC industry: “We believe PC sales bottomed out during the first quarter and that the industry is returning to normal seasonal pattern. Intel has adapted well to the current economic environment and we’re benefiting from disciplined execution and agility. We’re delivering a product portfolio that meets the needs of the changing market, spanning affordable computing to high-performance, energy-efficient computing."

Those comments about a PC bottom have been on the minds of just about anyone doing business in the sector, and certainly anyone investing in it. Otellini's comments bode well for the likes of Hewlett-Packard, Dell and Apple, as well as Microsoft.

The company's guidance continues to be murky, which might explain why shares are dipping after hours. Intel anticipates flat revenue, which considering they beat by $200 million in its first quarter, should actually be taken as an incremental positive. Intel isn't offering an EPS range, and its gross margin expectation is in the mid-40s. Some on the Street told me they were hoping for something closer to 46 or 47 percent.

Likewise, Intel did not offer any meaningful, full-year guidance, but did point out that it would see a reduction in capital expenditures for 2009. So, while Intel's news might bode well for the broader PC and chip markets, it may have an equally opposite effect on chip equipment makers like Applied Materials who rely on Intel's capex for its bread and butter.

Should be interesting to see whether Intel CFO Stacy Smith can do some effective handholding among Wall Street analysts when the company hosts its conference call later today. I'll be sitting down with Smith for an interview, portions of which will air on "The Kudlow Report,"and "CNBC Reports" tonight. The entire interview will be posted here later this evening.


Questions? Comments?