Here is Briefing.com's take:
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After the close ******
Intel (INTC) 133 3/4 +3 1/4. The preeminent chip-maker reports 1Q EPS of $2.20, beating the First Call estimate of $2.07 and coming in at the high end of the "whisper" range of $2.15-2.20. Revenues rose 39% from year-ago to $6.4 bln, but were basically flat relative to Q4. Gross margins were 64.2% in Q1, up from 63% in Q4. At the time of the last earnings report on January 15, Intel warned that gross margins would be flat to lower in Q1 - in fact, they rose slightly. Again in today's conference call, it was suggested that margins would fall slightly in Q2, though margins for the year were seen at the middle to higher end of the earlier stated range, which was 60% plus or minus "a few points." The company continues to warn that margins will fall toward 50% as the product mix shifts toward lower margin products such as network cards, motherboards, and flash memory. In after-hours trading, Intel first traded up to 137, but later fell sharply to 129 3/4, reportedly on Intel's statement that revenues "would be flat to slightly lower" in Q2. This possibility is not particularly threatening, as Q2 is seasonally soft for Intel - revenues fell 0.5% between the first and second quarters of 1996. The bigger picture is that demand for Intel chips remains strong, and that this stock is attractive at current valuations. At the after-hours price of just under 130, Intel is trading at about 15 times 1997 earnings and 12.5 times 1998 earnings - this for a company whose earnings per share have averaged better than 40% growth over the past five years. Pricing concerns remain with the Pentium II, which is due to be rolled out in May, but Intel downplayed these concerns in its conference call, noting that April price cuts will not be unlike those in February, and will continue to be aimed at producing a quick transition to its new product lines. It is doubtful that AMD's new K6 chip will cut significantly into either Intel's revenues or margins.
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Bill |
