Intel's Tough Trade Into Its Update

All eyes move to Intel (INTC - commentary - Cramer's Take) tonight, though all of us are probably as sick of talking about the semiconductor stocks as we are of writing about that "O" word. Intel's an important tell, first and foremost, for the PC and server business. Its guidance tonight during its midquarter update will shed more light on corporate IT spending and corporate capital expenditures in general.

Most data points, from the guidance at distributors like Ingram Micro (IM - commentary - Cramer's Take) to the recent raised guidance at commodity component companies like Maxtor (MXO - commentary - Cramer's Take) and Seagate (STX - commentary - Cramer's Take), indicate corporate spending is steadily improving and that end-user demand at these corporations is strong.

Probably as important as those "factual" data points is that no less an authority than Bill Gates, the man who's made himself the world's richest person by selling IT solutions to corporations, was quoted in Bloomberg Wednesday as saying that the economy was "very strong" and customers increasingly are willing to spend money on new technology projects and investments. Dismiss such a statement if you like; I'll take it at face value. The upshot is that I expect Intel to guide to the high end of its previous guidance.

The flash segment of Intel's business is where I have the most concern. Inventory issues and pricing for cell-phone components like flash have been problematic, and I think Intel still might be feeling some pressure there. To be clear, though, flash is a small part of Intel's business and not nearly as important to Intel or the market as the processor business.

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At time of publication, the firm in which Willard is a partner was net long Intel, although positions can change at any time and without notice.

Cody Willard is a partner in a buy-side firm and a contributor to TheStreet.com's RealMoney. He also produces a premium product for TheStreet.com called The Telecom Connection and is the founder of Teleconomics.com. The firm in which Willard is a partner may, from time to time, have long or short positions in, or buy or sell the securities, or derivatives thereof, of companies mentioned in his columns. None of the information in this column constitutes, or is intended to constitute, a recommendation by Willard of any particular security or trading strategy or a determination by Willard that any security or trading strategy is suitable for any specific person. Willard appreciates your feedback and invites you to send it to [e-mail].