Amid Fog, Intel Looms

It gets a boost from Texas Instruments, but there are worries about weakening demand.
Publish date:

Amid an uncertain tech landscape,


(INTC) - Get Report

, the world's largest chipmaker, reports first-quarter results after Tuesday's closing bell.

Shares on Monday closed the regular session at $22.21, down roughly 5% for the year, which is better than the performance of its peers. The Philadelphia Semiconductor Index is down 10%.

On Tuesday, the shares added 44 cents, or 2%, to $22.65.

Intel shares received a boost following

strong financial results Monday from

Texas Instruments

(TXN) - Get Report

, the world's third-largest chipmaker. TI also provided strong projections for the second quarter.

Despite the morning's increase, Intel's stock price has

fallen away from the $25 level that it briefly surpassed in early March, the first time in eight months that level was eclipsed.

Analysts expect earnings of 31 cents a share on sales of $9.31 billion, on average, according to Thomson First Call. During the same quarter last year, Intel reported net income of $1.7 billion, or 26 cents a share, on sales of $8.1 billion.

Midway through the quarter, Intel told investors to expect sales of $9.2 billion to $9.4 billion and gross margins of 57% compared with earlier projections for sales between $8.8 billion and $9.4 billion and gross margins of 55%.

During the update, Intel said it was seeing strength across all of its product lines and across all of its geographies. Intel also reported tight supplies of chipsets and certain computer chips. Intel's first-quarter sales typically decline 5% to 7% from the fourth quarter. The company's current financial targets represent a decline of 2% to 4%.

In early March, Intel CFO Andy Bryant cautioned analysts and investors not to get too excited about the quarter. That cautious tack might prove wise because demand may have weakened toward the end of the quarter.


(IBM) - Get Report

claimed that this slackening

sacked its results last week.


Advanced Micro Devices

(AMD) - Get Report

, Intel's smaller but primary rival, announced it was

getting out of the flash memory business amid oversupply and brutal price competition. Flash memory makes up slightly less than 10% of Intel's revenue, but it is a loss generator for the company.

Even TI, which claimed a strong finish to the first quarter, issued projections for only a seasonal performance in the second quarter.

For the second quarter, analysts expect Intel to report earnings of 28 cents a share on sales of $8.89 billion. As usual, the company will likely only provide targets for sales and gross margins.

Gross margins are a key for Intel investors, as expanding margins typically translate into a higher stock price. Bryant hinted in early March that margins might decline in the second quarter from the first, but the company is still targeting full-year gross margins of 58%.

Despite the possibility for a second-quarter margin pullback, some analysts expect Intel to boost its full-year margin goal because of cost efficiencies.