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Tuesday, April 14, 2009

Intel (INTC) 1Q:2009 results

Intel reports slightly better revenues.  Gross margins, arguably the stock driver, came in better than expected at close to 46% – the street was looking for closer to 43.6%.  ASPs held flat, according to the company – in my view, they are heading permanently lower as the low end of Intel’s line is the fastest growing portion and have an ASP 80% lower than the company average.  The more netbooks succeed, the more Intel ASPs will be pressured.  Operating income came in at 670 mil, better than the ~375 mil the street was looking for.  Tax rate of 1% drove a large EPS beat but should be largely dismissed as non-operational.

Guidance of… well… they’re not giving “guidance” but they’re “planning” for a flattish 2Q.  Gross margins will likewise be flattish.  The tax rate for the full year is being guided to 24%, which likely drives some higher EPS revisions.  Expectations for revenue guidance were anywhere from flat to up 5%, with much of the recent strength in the stock attributable to a stronger supply chain build from many PC component manufacturers as inventories were cut very aggressively when the economy hit the skids in 4Q:2008.

Intel is a company without much long-term growth.  They may look cheap on a historical basis but their heady days of consumer penetration are behind them.  Internet connected devices are moving into a more mature phase of platform insensitivity – the net and the interface are the devices that matter and Intel controls neither.  The stock is likely to tread between 12 and 16 without significant end demand changes which are unlikely in the near-term.

That said, it’s very possible Intel is deliberately suggesting the revenue outlook for next quarter is bleaker than it may actually be – expect many on the call to think they are low-balling.

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