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From: d1i1a1n1e1 (Rep: 108) reply to LionmasterDate: 01/15/2010 09:31
Forum: Intel Corporation - Msg #1965Thread #672883336 (Rec: 0)
hows that short doing?

Re: Intel A solid revenue beat 4Q sales of $10.56b (+12.8%) beat our/consensus f...

Reply to Lionmaster - Msg #1964 - 01/15/2010 09:29

Intel A solid revenue beat 4Q sales of $10.56b (+12.8%) beat our/consensus forecast of $9.9b/$10.16b. GM of 64.7% was at the upper end of guidance (62% +/- 3pts) resulting in GAAP EPS of $0.40 (incl. $1.25b in AMD settlement), vs. our est./consensus of $0.27/$0.30.

Richer mix offsets slowing unit growth
Our call for Intel's sales to disappoint had hinged on the belief that microprocessor units as implied Asia PC production had tracked below seasonal through 4Q. While we believe this is how it actually played out, as we estimate that Intel's CPU shipments were up a modest 6% (mildly below seasonal and only modestly above our forecast of +5%), a substantial increase in ASPs (up an est. 6-7% Q/Q) allowed Intel to post meaningful revenue upside in 4Q.

Raising ests and PO, but remain on the sidelines
We believe the meaningful rise in 4Q inventory (+18% Q/Q), and the expected increase in 1Q inventory bodes poorly for the stock as history suggests that the stock has underperformed following two large qtrs of inventory build (see chart 1). In addition, we see limited scope for upside potential to 2010 margins given: 1) an historically high outlook for GMs (61%) in CY10 and 2) an outlook for 10% rise in opex. Simply put, this leaves additional leverage at the mercy of sales growth - a low percentage likelihood in our view. Thus, while we are raising our CY10 GAAP EPS to $1.64 (from $1.43), we remain on the sidelines with respect to the stock.

Implications for broader chip group: Negative
We'd note that the slightly below seasonal growth in Intel's 4Q MPU shipments (consistent with the sub-seasonal shipments for PCs out of Asia) and the outlook for a seasonal 1Q are at distinct odds with the more bullish commentary from other chip suppliers suggesting above seasonal trends in 4Q and 1Q10. Given this discrepancy, we continue to believe that sales at other chip suppliers are benefiting more from an inventory build as opposed to acceleration in end demand. Our view, if correct, augurs poorly for the broader chip group.

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