Through The Fly's Eyes: Intel

from Theflyonthewall.com














Not Too Horrific; 1Q 2007 Might Be Low Point


Intel (INTC) reported results which continue to reflect the impact of a stronger competitor in Advanced Micro Devices (AMD), which was seen primarily in the gross margin line.

However, despite having a viable competitor, Intel results were reasonably good. Revenue came in at the top end of analyst estimates and guidance provided by the company for the 4Q 2006. In addition, guidance for 1Q 2007 also appears OK.

Historically, Intel has traded on gross margins, which have been in decline for the past year. There is some evidence to suggest that 1Q 2007 could be the bottom for this metric.

What could drive gross margins higher is the huge demand increase for processors as notebooks continue to go to a dual processor and desktops go to a quad processor design. This means demand for processors will continue to grow, but more importantly, the manufacturing costs for processors are dropping fast.

Use any price weakness to start buying Intel. It appears from both Intel and AMD chipset designs that Windows Vista operating system is going to require a lot of processing power. This could drive solid second half of 2007 results for both Intel and AMD.