Media See Intel Profit, Miss the Margins

Not exactly.

At the halfway point in the piece, we tiptoe past the gross-margin issue that should have defined the article. Sure enough, in the midst of a battle that is cutting prices to ribbons, gross margins came in at 46.9%, which was below expectations of 48%.

An article that does not place this first is off balance. But then, after bringing this up, the article concludes with Intel's claim that third-quarter margins will be just groovy, not even questioning why they would underperform now and do fine in a few months. Hey, it might happen. But such unlikely turns need to be explained. Did someone break out the price-war peace pipe? I don't think so...

Providing Perspective

Plenty of other media outlets, including TSC, got this right, but even The Wall Street Journal went awry. Look at this headline:

"Intel Signals Strong Chip Demand: Increase in Profit of 44% Shows Financial Progress, But Margins Disappoint."

Look, The Business Press Maven is not saying that Intel, a great company, showed no progress. But to put the situation in proper perspective for a company engaged in a price war with no visible end, we must put the horse before the cart, the chicken before the egg, margins comparisons before profit or revenue growth.

The Journal told us that there was strong chip demand? So what? Cut the price of your lemonade in half and you'll have stronger demand, no? But it won't do you much good.

To give investors a properly prioritized sense of what is going on, The Wall Street Journal should have said: "Margins Disappoint, Even as Revenue and Profits Increase."

The margin disappointment is more telling than the earnings increase or revenue, especially with the company's claim that it is going to hit margins in the low 50s in the third quarter.

Talk about the possibility of something burning.

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