Updated from 9:28 a.m. EDT

Intel ( INTC) shares dipped in early trading, as investors were unimpressed over a largely in-line quarter.

In recent trading the stock was down 21 cents, or 0.8%, to $27.46.

Late Tuesday the chipmaker posted an 89% gain in profit from the year-ago quarter and said profit levels will stay about the same in the quarter now under way. On the downside, the midpoint of its broad sales guidance fell a touch below the Wall Street consensus estimate, and the company admitted to a slight buildup in inventory.

At Deutsche Bank, analyst Ben Lynch called Intel's first-quarter results "relatively uninspiring." The upside in the first-quarter gross margin was overshadowed by disappointing second-quarter guidance, he noted. Relatively little new information on PC trends emerged, other than that desktop demand is running as expected and excess notebook inventory has been cleared.

He cut his second-quarter EPS estimate to 25 cents from 27 cents, while offering a few words of caution. "We continue to believe the market has overestimated Intel's 2005 gross margin potential, and specifically the risk from a more competitive AMD ( AMD)," he wrote.

Still, he has a buy rating on the stock, explaining that although Intel is no longer a momentum play, it "remains the quality semi stock" in light of its relatively low valuation and strong cash flow and returns. Deutsche Bank has done investment banking for Intel.

On a more upbeat note, Fulcrum's Clark Fuhs says he favors the higher end of second-quarter guidance because he believes Intel management is being conservative. "Demand from increased corporate spending should help the PC and server markets this year," he wrote. He believes semiconductor makers are likely to see the usual late-summer pickup in demand occur earlier than usual, perhaps as early as June or July, because supply is relatively tight this year.

For that reason, he predicts Intel's June midquarter update will be a positive catalyst for the stock.

"I think the numbers were pretty much in line," said Tai Nguyen, an analyst at Susquehanna. "The gross margin for the first quarter is good. If you exclude the charge, it's about 62%."

Referring to the slight decline in the stock, "they may just have some negative bias in the near term, but I don't think it would fall much lower," he said. "It seems like there's strong support in the low-$27 range." (Nguyen has a net positive rating on the stock; Susquehanna doesn't do investment banking.)

No major brokerages changed their rating on the stock Wednesday morning, although CSFB cut its 2004 earnings estimate by a penny to $1.14 a share and Morgan Stanley lowered its estimate to $1.25 a share from $1.27 a share.

On March 4, Intel signaled a slight slowdown in business in a midquarter update, prompting analysts to revise their estimates a bit downward; the news has continued to weigh on the stock, which was down 14% year to date as of Monday's close.

After the bell Tuesday, Intel said its first-quarter profit stood at $1.730 billion, or 26 cents per share, just below the consensus Wall Street estimate for 27 cents.

However, the nominal earnings shortfall reflected a legal charge rather than any shortfall in underlying business. On March 30, Intel agreed to pay $225 million to Intergraph to end an ongoing chip-patent suit, resulting in a first-quarter charge that reduced its earnings per share by about 1.7 cents.