Chris Lau, Kapitall: When Intel (INTC) revealed a rise in inventory sitting in its distribution channels, it was a blow for investors still waiting for the PC sector to improve. Intel acknowledged that the Haswell chip refresh will not yield stronger sales in the short term. Not until late August or early September will Intel gain a better sense of its recent sales trends.
[Read more from Kapitall: Ad Mega-Merger - What Publicis Omnicom Group Means for Advertising]
Yet despite the fact that weakness in the PC sector is expected to continue, Intel looks positioned to thrive.
Financial SummaryInventory grew in Intel’s second quarter. The company attributed the increase to customers beginning to build PCs based on the Haswell processor line-up. Overall, inventories remain well-below historical averages. Intel expects revenue to be at the same level as last year. To adjust for a weaker PC market, Intel is reducing its capital expenditure by $1 billion, to $11 billion. Gross margins are expected to be 59%, as opposed to the prior forecast of 60%. For the next quarter, Intel forecast revenue would be $13.5 billion, up 5% from last quarter. Gross margins are expected to increase by 3 percent, to 61%. Haswell in Focus Intel is diversifying away from traditional PCs, into such devices as ultrabooks. The refresh of chips, including the Haswell, could still improve margins and profits. Intel released quad core products last quarter and this quarter, dual core processors will follow as lower priced products. For now, Intel will not be able to determine if sales will improve, but the chips do offer some innovation for consumers. Devices can now be built without the need for fans to cool the chip. In 2014, the Bay Trail chip will introduce even more innovation – at only 14 nanometers, it will use even less power or produce less heat.
Select the service that is right for you!COMPARE ALL SERVICES
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV