Chip behemoth Intel (INTC - Free Intel Stock Report) reported fairly good news for the March quarter. More specifically, earnings per share came in at $0.53, which although a few cents below the prior-year tally, managed to outdistance our initial $0.50 estimate. Revenues outpaced last year's figure, at just over $12.9 billion, which is particularly impressive, given the somewhat uneven economic recovery. However, the gross margin came in at 64%, which was a tad lower than we had expected.

PC Client Group revenue was down 7% on a sequential basis, at $8.5 billion. (Investors should keep in mind that the December period is Intel's strongest seasonally.) Also, the Other Intel Architecture Group slipped modestly from the December quarter, to $1.1 billion. Particularly noteworthy is that Data Center Group revenue declined approximately 10% from the prior period, to $2.5 billion, and was flat relative to last year. It also should be noted that this segment had been particularly strong in recent quarters, and helped to offset sluggishness in the personal computer market. Thus, the relatively lackluster results in this segment may be something to keep an eye on. On the other hand, the first quarter of 2012 benefited from full-quarter revenue contributions from last year's McAfee and Infineon Wireless Solutions acquisitions.

As a result of the recent news, we have upped our full-year revenue outlook to $56.875 billion, a slight increase from our initial $56.560 billion estimate. Additionally, full-year earnings per share are likely to be $2.45, a nickel increase from our early-April full-page review. We also have increased our June-period revenue and earnings estimates to $13.6 billion and $0.56 a share, respectively. The gross margin, however, will probably decline a bit compared to the March-period level.

Intel stock fell modestly, despite the decent earnings showing. We believe that this might reflect the aforementioned sluggishness in the Data Center Group, coupled with a less-than-sanguine gross margin view for the June period. What's more, although the company outdistanced Wall Street's expectations for the period, we believe that some had anticipated an even stronger showing.

We continue to like the Intel story for the longer term. The company will continue to be the market leader in the personal computer chip sector for years to come. However, this segment is relatively mature, and thus, top-line growth there might well be only moderate. With that in mind, Intel will likely continue to augment its manufacturing processes in order to increase efficiency and reduce costs, and thus give it a leg up on the competition. Its pristine balance sheet is also a plus. What's more, Intel continues to strive to diversify its operations. Last year's acquisitions of McAfee and Infineon's Wireless Solutions business are a step in the right direction, in our view. Furthermore, the company plans to enter the Internet-based TV service market, which is an interesting endeavor to keep an eye on. The stock offers a yield that is solid, particularly compared to its technology peers, and the payout is secure.

About The Company:Intel Corporation is a leading manufacturer of integrated circuits. In addition to primarily supplying manufacturers of personal computers, the company serves a multitude of other global markets, including communications, industrial automation, military, and other electronic equipment. Intel’s product line consists of microprocessors, with the Pentium series being the most notable. It also manufactures microcontrollers and memory chips, and the company sells computer modules and boards, and network products.

At the time of this article’s writing, the author did not have positions in any of the companies mentioned.