Intel Earnings Preview: What We’re Watching

October 17th, 2011 by Trefis Team
+10.33%
Upside
24.51
Market
27.04
Trefis
INTC: Intel logo
INTC
Intel

Intel (NASDAQ:INTC) will report its Q3 2011 earnings tomorrow. The company has done well in terms of revenue growth despite PC market turbulence and it will be interesting to see whether it can again display this strength in this earnings release. Moreover, as one of the first semiconductor companies to report earnings, it will also give us cues regarding how macro factors are likely to affect the upcoming results for companies like AMD (NYSE:AMD) and Nvidia (NASDAQ:NVDA). There are couple of aspects that investors will keep a keen eye on, in tomorrow’s earnings release highlighted below.

Our price estimate for INTC stands at $27.73, implying a premium of about 20% to the market price.

PC Market Weakness Impact

Relevant Articles
  1. Can Intel Stock Rebound With Trump?
  2. A Strong Q3 Can Push Intel Stock Up After A 55% Slump This Year
  3. Nvidia Can Outbid Qualcomm To Acquire Intel At 50% Premium
  4. $30 In Sight for Intel Stock After Amazon AI Chip Win?
  5. A Turnaround Scenario For Intel Stock To Reach $60
  6. Intel Stock Could Dive To $10

It is no news that the PC market is slowing due to dual impact of the popularity of tablets and economic woes in the U.S. and Europe that is causing enterprise and retail customers to defer technology spending. There are two things to look at, in such a situation: the number of microprocessor units sold and average selling prices.

For Q2 2011, IDC estimated that global PC microprocessor shipments were down compared to Q1 2011 and flat compared to Q2 of 2010. [1] The economy has worsened since then, and we think that unit shipments could suffer.

Furthermore, we think that due to stagnant growth or mild declines in developed markets and continued growth in emerging markets, the sales mix could shift towards cheaper processors. It is unclear whether or not the continued adoption of Sandy Bridge chips could offset this potential ASP decline for Q3 2011.

Data Center Growth

For the past few quarters, Intel has consistently grown its server business by gaining market share and pushing higher ASP chips. This is another critical area that investors should keep an eye on since if PC market suffers, this could act has a bit of hedge since tablets and smartphones are likely to use lot of data intensive applications that use cloud storage/computing. Intel has a very high share in the server market.

Furthermore, we expect Intel to disclose more details around its plans for ultra-books which, the company believes, will form a very large share of notebook sales in 2012.

Understand How a Company’s Products Impact its Stock Price at Trefis

Notes:
  1. IDC Finds Second Quarter Worldwide PC Microprocessor Unit Shipments Down Slightly Compared to First Quarter, About Flat Compared to Second Quarter of 2010, IDC Press Release, Aug 2 2011 [↩]