Reality Check: Why the Intel Bears Really Got It Right

Boy, I must really be a glutton for punishment for what I'm about to write, but if you break down the numbers, it's not really clear that Intel (INTC) had the blowout quarter -- or even beat the number -- that Wall Street believes it did. At least that's the interpretation of money manager Bill Fleckenstein, who was quoted here earlier this week saying that Intel would not make the number. (Believe me, after I saw that number, I was ready to give him and his newsletter-writing pal Fred Hickey failing marks for their call here; no need to wait till the semiannual report card.)

However, some postrelease number-crunching tells a somewhat different story.

On the surface, Intel earned 69 cents per share, after subtracting out acquisition-related charges. However, based on Merrill Lynch's prior forecast, at least 3 cents of that 8-cent charge is believed to be higher than expected. More important, the company itself said in its earnings release that interest and other income was $508 million in the fourth quarter, or $228 million higher than the company's own guidance. That $228 million breaks down to around 5 cents a share after tax.

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That makes the final tally for earnings from the chipmaker more like 61 cents per share, or below expectations. (And earnings from operations -- like it or not -- are the name of this game. It's the quality of the earnings, not the quantity.)

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Revenue, however, did beat expectations, and the company's guidance was positive, so Fleckenstein's analysis is likely to be dismissed as irrelevant. But the numbers are the numbers -- do with them as you wish. (Oh, and by the way, this isn't saying that Intel isn't a great company and won't be even greater in the future. It's just that its earnings over the past two years are up 20% and its stock is up 150%. That's why folks like Fleckenstein don't give up.)

P.S.: If you're planning to spam me with hostile reactions today, don't. I'll be in New York all day visiting sources, and I'll be there well into the evening doing our Fox TV show.

CVS, continued: Heard from a CVS (CVS) spokeswoman yesterday who emphatically insisted CVS had done nothing tricky, as this column suggested yesterday, to make its December sales numbers look better by adding an extra week to its sales.

To recap, the company ends its fiscal year and December monthly sales calendar on the Saturday closest to the end of the month. As a result, most analysts figured the quarter would've ended on Dec. 25; it ended Dec. 26 and Dec. 27 in the two prior years. But when the company reported December sales, the cutoff had been extended to Saturday, Jan. 1. A spokeswoman says CVS, like some other retailers, sets up its quarters with two four-week periods and one five-week period, with the last quarter of the year ending on the last Saturday in December. Every five years, she adds, that means a sixth week is added to, in a sense, reset the company's calendar, "and there's nothing unusual about this" among some retailers.

Maybe not, but CVS, which until a few years ago was part of the old Melville Corp., hasn't been a standalone company for five years. How can this be its fifth year for this schedule? The spokeswoman would only say that the extra week has been on CVS' calendar "forever." Then, why didn't most analysts know about it? She says they should have. (But they didn't.)

She adds that the company decided that 1999 would be the year to switch because if it waited until 2000 -- based on its old schedule -- it would have had to end the year on Dec. 23, or a few days before Christmas. (That's what she said, and I'm still confused.) However (and this is where the story gets confusing), the company has always said that its year ends on the Saturday closest to Dec. 31. According to my calendar, that would've made the last day of fiscal 2000 Saturday, Dec. 30, no matter which schedule the company was using.

Maybe the company should change its name to SVC -- Simply Very Confusing.

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