As was expected, Intel [NASDAQ: INTC] yet again managed to beat the general consensus earnings expectations of both Wall Street and other institutions. Furthermore, they surpassed their previous record quarter where they reached revenue of $10.8B with a net income of $3.0B. In their earnings report, they actually reported net income of $3.0B on $11.1B in revenue.
While Intel was able to increase their revenue to $11.1B and their net income stayed flat at $3B, their gross margin was down 1% to 66%. This is in line with their revised expectation of 65-67%. This isn?t really much to be concerned with as they?ve been able to hover around the mid to high 60?s for quite some time now. This is mostly driven by continued growth in their PC Client group and Data Center Group. Many believed, including Intel, that there was a good chance that the PC Client Group would see shrinkage but it instead saw a growth of 3%. As for the Data Center group, we likely would attribute that to the ever increasing creation of new cloud computing solutions being implemented by businesses both internally and externally from one side, and continuous market share gain as AMD’s Opteron continues to lose market share.
Is Intel Atom being strongARMed?
Interestingly, though, Intel saw a 4% decrease sequentially in the Atom microprocessor and chipset business. This is likely due to the decreased shipments of Netbooks due to the increasing sales of Apple?s iPad and the anticipation of tablets from other manufacturers implementing ARM chipsets. There is still some room left in the newly created tablet space for Intel?s Atom business, but they need to prove to the market that they need x86 in their tablets for the best user experience. There is, though, a bright spot in the Atom business division and that is the recent announcement of Google TV based devices which all feature Intel?s CE4100 Atom SoC. These will be shipped inside of Logitech?s Revue as well as inside of TV?s like Sony?s Smart TVs with Google TV already built in.
Intel also reported that their ASP for microprocessors was approximately flat sequentially but still up year over year. This indicates that Intel is benefiting from a lack of price competition from AMD and isn?t forced to drop the prices of their chips in order to compete better with AMD. When it comes to that subject, we find ourselves waiting for AMD to introduce a processor and chipset that gives Intel a run for their money to drive down prices. We have yet to see that really happen in the consumer space.
Rosy Fourth Quarter Outlook: 11.4 Billion?
When it came to outlooks for 4Q 2010, Intel was once again bullish with their expectations predicting a revenue of $11.4B +/- a margin of error of $400M. They also expect the gross margin to sit around 67% plus or minus a few percentage points, effectively remaining at the same place it is now. Intel pretty much expects 4Q 2010 to be exactly the same as the 3Q 2010 in performance, slightly edging out the previous quarter. As the economy improves slowly, we expect to see Intel and other microprocessor?s revenue and profits to grow at a similar pace. Right now, the economy is not growing at a pace that necessarily stifles semiconductor sales, but rather a company needs to be inventive in how they pitch their products to consumers. The introduction of Google TV will likely help improve Intel?s bottom line as long as it gains enough traction in the marketplace and Intel?s other business divisions maintain or surpass their current levels of growth.
Intel Stock Price? Is it time for Wall Street to wake up and smell the [silicon] coffee?
As for Intel?s stock price, we?re still amazed to see it still hovering around the $20 mark. If any other company [say AAPL] put out these kinds of figures quarter over quarter, their stock price would be sky high [like AAPL?s]. Oddly enough, Intel?s operating margins are better than Apple?s and yet there is a gigantic disconnect between the two companies? stock prices. To be frank, Intel?s stock price is lower than almost all of the companies of their size and importance. We?re not sure if we?d simply consider Intel to be a stable stock, or one that is stagnant… but the bottom line is that their stock price does not reflect the company?s performance. At the close of trading, Intel?s stock was up 0.21 or 1.07% at 19.77 and continues to go upward in afterhours trading, but has yet to break the $20.00 mark as has been the problem for the past two months.