Value Line is regarded as the best independent research available. More than just recommendations, Value Line provides the rationale behind its picks for greater understanding.
- Don D., California
Dow 30 Earnings: Intel Corp. – Third Quarter 2010
Chip behemoth Intel Corporation (INTC - Free Analyst Report) reported strong results for the third quarter of 2010. In all, the company earned $0.52 a share on sales of just over $11.1 billion for the interim, which compared favorably to last year's figures of $9.4 billion and $0.33 a share, respectively. The result was also a little better than what we had estimated.
Microprocessor unit sales hit a record for the quarter, thanks to healthy demand on the Enterprise (corporate) side, along with increased demand in emerging markets. The Enterprise group remained strong, as corporations continued to replenish their IT-related needs. Also, inventories in the enterprise channel appear to be at a healthy level. These factors helped to offset sluggish results on the consumer side.
The gross margin came in at a sound 66%, while operating income of $4.1 billion was a quarterly record for the company. Gross profits benefited from economies of scale, along with Intel's leadership position across many product groups.
The news is fairly positive for the December quarter as well. Management believes that revenues will be $11.4 billion (plus or minus $400 million), which equates to a sequential improvement of about 3%. What's more, the gross margin is likely to be approximately 67%. Management notes that the average seasonal increase for the December quarter is 8%.
The reduced view relative to historical standards reflects probable continued softness in the consumer segment, coupled with customers reducing inventories in anticipation of the Sandy Bridge (its next-generation chip that combines central processing and graphical functions) launch in the first quarter of 2011. We have boosted our 2010 full-year share-net estimate by a nickel, to $2.00.
Intel stock rose slightly in price initially reflecting the generally positive outlook, but subsequently gave back these gains. We think that these shares are a worthwhile long-term holding. Earnings should rise at a double-digit annual clip over the pull to 2013-2015, reflecting the company's immense size and strong pipeline of new products.
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. The company also 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.