(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:
  • Refilling depleted inventory channels isn't an accurate measure of demand
  • Horror sequel: Invasion of crappy netbooks floods the market, again
  • Disconnect: Intel points up for sales growth while the PC industry is pointing down
  • PC Slump Weighs on Microsoft

    Intel says it cut inventory by $900 million or 24% from its $3.7 billion peak in the fourth quarter. This is a delayed reaction to the collapse in consumer and business spending last year. Intel didn't provide a total second-quarter inventory level, but if the 24% cut is correct, it would put supplies at around $2.8 billion, and well below the $3.3 billion norm.

    "The inventory channel, which had dramatically depleted itself in the fourth quarter and into the first part of the first quarter, is starting to refill," CEO Paul Otellini told analysts on an earnings conference call Tuesday, according to a transcript on SeekingAlpha.

    What we are seeing, then, in Intel's inventory-peaks-and-valleys topography, is the climb. The problem is that Intel is probably scaling a new inventory mountain.

    Computer makers like Dell, Hewlett-Packard ( HPQ), Acer and Apple ( AAPL) are gearing up. "They are building "inventory up in anticipation of a stronger seasonal second half," Ottelini said.

    The big growth segment in the PC market has come from netbooks, the scaled down laptops that sell for $300. Netbooks drive a big portion of Intel's sales, but the cheaper Atom chips erode the higher-priced Celeron and dual core chips that fortified Intel's bygone revenue levels.

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