Analyst: Intel will weather the storm

Intel got an upgrade Tuesday on the theory that the chip giant's third and fourth quarter results will be decent amid a weak global economy.

Piper Jaffray analyst Auguste Richard upgraded Intel to buy from neutral based on the theory that the chip giant can top low expectations. Wall Street is expecting Intel (all resources) to report third quarter earnings of 34 cents a share on revenue of $10.27 billion, according to Thomson Reuters. For the fourth quarter Wall Street is currently expecting Intel to report earnings of 40 cents a share on revenue of $10.88 billion.

While acknowledging that Intel isn't immune from a slowdown and there have been "some cancellations in the PC supply chain," Richard noted that Intel continues to run at full capacity largely due to demand for its Atom chips, which power so-called netbooks.Richard's theory goes like this:

• Intel isn't likely to miss its third quarter targets;
• Atom is positioned in the PC market's sweet spot;
• Intel has $12 billion in cash and can use that to whack weaker competitors like AMD.
• And he isn't expecting much in sequential growth--only a 3 percent revenue gain in fourth quarter from the third quarter. Intel usually does 8 percent or so.

The biggest takeaway is that Intel is in its best position in a while. Richard writes:

Intel's competitive positioning is the best it has been in the history of the company, in our opinion. While most analysis of Intel focus on the company's product portfolio, we think the company's real competitive strength and core competency is its manufacturing prowess. While most other chip makers are pulling back on process development and capital spending, Intel is forging ahead. The company is currently a full process node ahead of its competitor, and with the use of a high-k metal gate the company has faster and more energy efficient products. We believe no one else in the industry is close to moving a high-k metal gate product into production, and we believe investors do not fully comprehend the value of this technology in terms of reducing feature size (cost), improving performance and reducing energy consumption.