Intel Seen Boosting 4Q Sales, Buoyed By PC Demand
Wednesday December 3, 12:44 pm ET
By Donna Fuscaldo, Of DOW JONES NEWSWIRES
NEW YORK (Dow Jones)--Buoyed by strength in the personal-computer market, chip giant Intel Corp. (NasdaqNM:INTC - News) is expected to raise its fourth-quarter revenue range when it holds a mid-quarter update Thursday.
Intel, which is in one of its strongest three-month periods of the year, is benefiting from better-than- expected demand for PCs. Analysts said the Santa Clara, Calif., semiconductor maker is likely to raise its revenue range to between $8.3 billion and $8.7 billion, from its previous range of $8.1 billion to $8.7 billion. Some even think the low end of the range could rise to $8.5 billion.
"Our most recent checks indicate that notebook and desktop MPU ( microprocessor) sales remain robust, with motherboard makers expecting sequential unit sales of 10% to 15% on average in Q4," wrote Michael McConnell, an analyst at Pacific Crest Securities in a recent research report. "Notebook demand appears particularly strong, with many of our contacts expecting unit growth exceeding 20% over the prior quarter."
McConnell is calling for Intel to report fourth-quarter sales of $8.6 billion and earnings of 30 cents a share. Analysts, according to Thomson First Call (News - Websites) , have Intel weighing in with earnings of 29 cents a share and sales of $8.5 billion. In the year ago fourth quarter, Intel reported earnings of 16 cents a share and sales of $7.16 billion.
The fourth quarter is one of the most lucrative periods for Intel and other computer companies because of the holiday selling season. Based on preliminary data from some of the U.S. computer makers and electronics retailers, sales during the Thanksgiving shopping weekend, the first official holiday shopping weekend, were healthy.
Take Hewlett-Packard Co. (NYSE:HPQ - News) . The Palo Alto, Calif., computer maker said notebook sales during the extended weekend rose 50% from a year ago. And officials at Best Buy Co. and Wal-Mart Stores Inc. (NYSE:WMT - News) also said notebook and desktop computers sold well.
But Intel's good news won't be reserved to a better sales outlook, analysts said. They expect the company to raise its gross margin target for the December- ending quarter to the high end of its previous target for margins of 60%, plus or minus a couple of points. According to analysts, Intel is benefiting from advanced manufacturing technology that cuts what it costs to make its chips.
"Based on the company's continued cost reductions, such as the migration to 300mm wafers and 90nm die technology and higher utilization rates, we believe the company can achieve a peak gross margin above their historical peak," wrote Banc of America Securities (News - Websites) analyst John Lau in a research report.
According to Lau, who raised his 12-month target price to $39 from $34, Intel's peak gross margins were 63% in 2000. Lau is calling for Intel to report sales of $8.7 billion and earnings of 31 cents in the fourth quarter. He previously targeted sales of $8.4 billion and earnings of 29 cents a share.
Further analysts said Intel's margin improvement is coming from the shift toward notebook computers, which have higher average selling prices.
Shares of Intel were recently trading up 36 cents, or 1.1%, to $34.21, on volume of 20.8 million shares. Average daily volume is 52.2 million shares.
Lau and McConnell don't own shares of Intel. Banc of America intends to seek an investment banking relationship with the chip giant.
-By Donna Fuscaldo, Dow Jones Newswires; 201-938-5253; donna.fuscaldo@dowjones.com |
