Instant View: Intel revenue forecast falls short, capex swells

Published January 17, 2013

| Reuters

Intel Corp forecast current-quarter revenue that was slightly below expectations, as the personal computer industry grapples with falling sales and a fundamental shift in consumer preferences toward tablets and smartphones.

Commentary

TRIP CHOWDHRY, ANALYST, GLOBAL TECHNOLOGY RESEARCH

"Intel needs to keep investing in new plants this year, even though revenue could be flat to down over the course of 2013, he said.

"They have to continue to invest in new technologies.

"I don't think weakness is a buying opportunity. There are not enough catalysts to push revenues up."

PATRICK WANG, ANALYST, EVERCORE PARTNERS

"At $13 billon, the capex number implies that the PC business is fine, that they need that capacity. Given that PC business isn't growing as much as before, you would have expected around a $10 billion type of range. The fact that we're $3 billion above that has got to get some investors concerned about the possibility of excess capacity.

"Which is why to me that number gives us confirmation that they're planning to really ramp their foundry business this year.

"A lot of folks had expected Intel to really be in line or even below.

"Revenue guidance of kind of low single digits and GM guidance of 60 percent is about 100 bps higher than the street.

"It means that we're not going to continue to slide lower. PCs really degraded over the course of 2012, and the guidance and the numbers they giving us here probably means that we've hit the bottom, we're seeing stability, and we should start to see some growth shortly.

"We'll see what happens. Intel has really not been all that accurate in their long-term forecasts. But it signifies that they feel more comfortable with the PC landscape."

KEVIN CASSIDY, ANALYST, STIFEL NICOLAUS

"There seem to be a lot of investors who thought that Intel's utilization rates would drop and that gross margins would go down with it. Seems like they're managing through this downturn pretty well.

"It seems like PCs were slightly lower than we expected. It seems like they slightly under-shipped the market. They're up 7 percent in the more profitable server market.

"First quarter seems like it's going to be slightly lower than what the Street was anticipating, but we think again that's weakness in PCs, and some in servers, in the first quarter. Looks like their guidance for the year is very strong with 60 percent gross margins -- that would be up from 58 percent in Q1.

"It seems like they're positive and they think they're going to grow in the low single digits. That's because we think, in the second half of 2013, we expect to see growth in the PC market.

"It's the best tool in Intel's toolbox: their manufacturing.

"They're going to push forward and that separates them from their competitors and allows them to come out with lower-power, higher-performance processors in the future.

"Some of these new PCs that are coming out are innovative and can actually start taking back some high-end or $700 tablets. We think that if you get a full PC that is convertible to look like a tablet with touch, we think that's a very compelling product.

The results show that the "PC industry is still around and maybe it was slightly exaggerated that the death of the PC was here."

DOUG FREEDMAN, ANALYST, RBC CAPITAL

"The numbers are not worse than feared.

"The Q4 beat looks like the tax rate. Gross margins came in slightly better than expected.

With regard to the higher-than expected capital expenditure forecast, "this is a company that is continuing to spend money to participate in the market. That may concern some investors."

STACY RASGON, ANALYST, SANFORD C. BERNSTEIN & CO

"The gross margin guidance is a little higher than people thought. That may be supporting the stock.

"People are starting to freak out about the capex.

"They are making the bet this year and hoping for a big revenue lift in 2014. If you think that PCs are not growing that much anymore, then what's going to drive it?

"The concern is that if I spend a lot of money and I build up my factories, I don't have enough demand to fill them, they have very high fixed costs, and it pulls your margins down."

CODY ACREE, ANALYST, WILLIAMS FINANCIAL

"The upside to EPS came from 4 points of better tax rate, so that's not necessarily the best way to beat earnings.

"The revenue outlook is light. The good thing is they are looking at pretty decent margins: a couple hundred basis points for the full year. The revenue isn't going to be there, but the margin and expense control is going to stabilize the bottom line.

"It's probably a success if you can be flat in an industry that most people expect to be flat-to-down. But remember that is the expectation of flat. That is not the delivery of flat.

"If they are able to be flat, that will be great, but it is probably going to be a challenge to be flat."

(Reporting By Jim Finkle in Boston and Alexei Oreskovic and Malathi Nayak in San Francisco)

URL

http://www.foxbusiness.com/news/2013/01/17/instant-view-intel-revenue-forecast-falls-short-capex-swells/