14 DAY TRIAL // Intel has been moving upwards lately, and its shares rose 1.46 points on Tuesday, closing up at $18.73, with an 8.45 percent gain. The company marked this upgrade at a time when competitors like Advanced Micro Devices and Texas Instruments have their shares traded at much lower prices. Intel is expected to report its third-quarter earnings on October 14.
The news attributes Intel's gain to investment bank Piper Jaffray, which leveraged its rating on Intel to "buy" from "neutral" on Tuesday. According to Auguste Richard, a Piper Jaffray analyst, Intel looks like a safe investment at the time, and it is about to make its third-quarter earnings numbers. Also, it seems that the chip makers’ factories are running nearly flat out, meaning that the gross margin will be favorably affected, which translates into profitability.
Intel's gross margin for the third-quarter is expected to near the midpoint of the gross margin range, with $10.2 billion in sales, said Richard. Intel's June forecast for the third quarter ranged from $10 billion to $10.6 billion in sales. “It's a 6 percent grower in terms of net revenue, so it's not very exciting,” Piper's Richard said. On June 26, Intel reported cash and cash equivalents of $7.6 billion and generated $2.8 billion in cash from its operating activities for the ending quarter. Also, the company invests billions every year in technology and improvements to its semiconductor fabrication processes.
“No one else can invest at the level Intel can,” Richard said. “We're going through a rough economic time, but if I had money lying around and I had to put it somewhere, I'd actually put it in Intel. I'd get a better return than I would in the money markets or T-bills -- and Intel is much more likely to pay a high dividend.”
Intel's Chairman Craig Barrett said the company would still invest aggressively in products and technologies although the U.S. financial meltdown could have a negative impact on emerging markets it needs to grow, states a Reuters report. “The only thing I would argue is that a lot of Intel's cash position is in investments, so they tend to get whacked when the markets go down,” Doug Freedman, an equity analyst with American Technology Research, told the E-Commerce Times. “I suspect it's a negative right now due to the turmoil on Wall Street.”
Intel may face a problem due to a shift in the industry towards lower-end chips. “I think there's a tremendous shift towards the low end in the chip market, which will make it very hard for Intel to sustain revenue and profit growth,” noted Freedman.
Yet, the company is getting ready to launch, in the fourth quarter, a series of products based on a brand new chip architecture, and this may help the company a lot. The new line of processors, Nehalems, will initially ship as Core i7. The company also announced Nehalem server products slated for launch during the first quarter of 2009.