Intel eyes sales pickup, investors cautious
By Noel Randewich
(Reuters) - Top chipmaker Intel Corp posted earnings confirming the PC industry is alive -- but not kicking -- and said sales would accelerate in the second half of the year with a powerful new PC processor.
In a first-quarter earnings report that did not inspire investors to push Intel's recently high-flying stock further, the company also said costs associated with ramping up new production lines would hurt gross margins more than expected.
"It's not that they disappointed, they just didn't give us the bull case. In previous quarters they blew the numbers out of the water," said Patrick Wang, an analyst at Evercore Partners.
The long-time technology bellwether is ramping up production of its newest PC processor, codenamed Ivy Bridge, which is expected to drive sales later this year and power a new crop of super-thin laptops dubbed "ultrabooks."
But the costs of upgrading the factories where the chips are being made is temporarily hurting margins, Chief Financial Officer Stacy Smith told a conference call.
That was bad news to Wall Street, which has pushed shares of Intel 17 percent higher so far this year.
"They had strong execution for the most part, and in-line expectations for the PC market. But from a investor standpoint you have a multi-year high stock price, very much priced for perfection. That gross margin guidance, while understandable, was not perfection," said Cody Acree, an analyst at Williams Financial Group.
Intel said non-GAAP gross margins in the second quarter would be 62 percent, plus or minus 2 percentage points, down from 64 percent in the first quarter. Intel's full-year gross margin forecast of 64 percent was unchanged. Continued...