Intel Shares Turn Lower

Updated from July 17

Shares of Intel(INTC Quote) slumped early Wednesday after the chipmaker's second-quarter earnings report revealed weaker-than-expected margins.

The stock was off $1.14, or 4.3%, to $25.19, dashing the high hopes that buoyed the stock ahead of the earnings report.

Intel's stock has risen almost 25% in the past three months on expectations that the chipmaker's turnaround was starting to bear fruit, thanks to an improved lineup of microprocessors and a restructuring that has eliminated 10% of its workforce and $2 billion in costs.

"Even though we believe the company is making pretty steady progress in its turnaround, expectations were so high that it was going to take inarguable upside in Q2 results and better Q3 guidance to keep the stock moving," said Stifel Nicolaus analyst Cody Acree, who rates Intel a buy. The firm makes a market in Intel shares and has provided Intel with noninvestment banking services in the last 12 months.

On the top line, Intel showed some real progress in the second quarter, posting its first year-on-year sales gain since the fourth quarter of 2005.

Sales in the three months ended June 30 were $8.7 billion, at the high end of its own guidance, and slightly ahead of the $8.5 billion expected by analysts. At this time last year, Intel had sales of $8 billion.