(Updated with closing stock price)You can't blame people for wanting to infer from Intel's ( INTC) strong second quarter performance that a tech spending recovery is under way, but they are wrong. Intel's blowout quarter, while impressive, had far more to do with Intel's chip inventory correction and less to do with PC sales. Dell's ( DELL) woes this week offer a starkly different view on the PC market. Here are three reasons the Intel-inspired tech rally will end in tears:
PC Slump Weighs on Microsoft
"They are starting to reorder, and you are starting to see that pretty dramatic quarter-on-quarter swing reflected in our numbers," Otellini said on the call, in reference to netbooks. After last year's flood of netbooks and a rising level of consumer disappointment with the feature limits of these devices, it seems we are in for a rerun of last year's netbook fiasco. Intel's new sales projections suggest a 10% increase when PC industry sales are headed for a 10% decline this year, JP Morgan analyst Chris Danley said on the earnings call. His comment was a preface to a question. "How do you guys explain the discrepancy between processor sales and PC sales," Danley asked Otellini suggests two realities exist. "My sense is that the forecasting world is catching up to the reality of what's being shipped today," Otellini said, "more than projecting where the world will really be." Investors might be wise to steer clear of Intel's view of reality. Intel shares closed Wednesday up 7.3% to $18.05.