Intel's quarterly checkup: Worries abound

Intel reports its fourth quarter results on Tuesday and the consensus seems to be that first quarter targets are going to come down amid slowing PC demand and higher inventory levels.

For the record, Wall Street is expecting Intel earnings of 40 cents a share for the fourth quarter on sales of $10.8 billion, according to Thomson Financial. For the first quarter, Wall Street is expecting to report earnings of 34 cents a share on sales of $9.98 billion.

But the numbers only tell part of the tale on this report. Intel watchers will be listening for clues from Intel about inventory levels, demand and selling prices. And for good measure folks will wonder how bad Intel is squashing AMD amid its Barcelona chip issues.

Here's a sampling of opinions going into Intel's report: Michael McConnell, an analyst at Pacific Crest:

Checks ahead of earnings reports indicate that semiconductor distributor resales missed expectations for Q4, with sequential declines of 5% to 15% reported versus prior expectations of flat to down 10% for the quarter. Distributors cited weak desktop PC sales, tighter component inventory controls at notebook ODMs, inventory work-downs at Chinese communications infrastructure customers, and weak component demand forecasts from branded handset and whitephone manufacturers in China as causes for their shortfalls. In addition to cautious commentary regarding desktop demand from distributors, supply chain checks indicate excess desktop inventory in Dell hubs and at Acer customers in Western Europe, which has led a Taiwanese OEM to issue downward forecast revisions to notebook ODM partners for Q1. We note that disappointing Q4 motherboard unit sales at key Dell suppliers Asustek and MSI offer further evidence of a desktop component overbuild at the OEM.

Add it up and McConnell thinks Intel estimates will have to come down. UBS analyst Uche Orji: Intel's business is likely to slow, but its well positioned. Orji writes:

We see several trends that should positively impact Intel’s business, mitigating the effect of potentially slowing sales and the consequent margin drag as a result: 1) Benign ASPs, 2) Server resurgence, 3) Restructuring efficiencies, 4) Lower capital intensity and opex as a percentage of sales. 2008 guidance likely to be cautious on macro uncertainty... Our recent checks also suggest that inventory may be rising in China.

Gurinder Kalra, analyst at Bear Stearns:

Stronger server and notebook processor shipments should have more than offset incremental desktop weakness. We believe there has been significant trepidation recently among investors with regards to a slowdown in the PC market. Based on our recent channel checks, we believe these concerns are overblown.

Sumit Dhanda, analyst at Bank of America Securities:

We also believe that Intel had a solid quarter in servers, and likely gained share vs. AMD helped by the lack of a strong competitive platform and the delays to the Barcelona ramp.