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Intel: Strong quarter expected amid PC unit growth

Strong PC unit growth in the fourth quarter is likely to fuel Intel's financial results and outlook.
Written by Larry Dignan, Contributor on

Intel's fourth quarter should be a strong one courtesy of strong PC unit shipments.

The chip giant reports earnings after the closing bell on Thursday and analyst are generally expecting a strong showing. As IDC reported Wednesday, PC shipments popped in the fourth quarter courtesy of consumer demand for value-priced notebooks and netbooks.

Given that Intel chips---notably Atom---power most of those units company executives should have a few upbeat comments. Meanwhile, the outlook should be solid considering that the year ago quarter was a total trainwreck as the U.S. economy hit bottom.

Wall Street is expecting Intel to deliver earnings of 30 cents a share on revenue on $10.17 billion. Gross margins for the quarter are expected to be 62.19 percent, according to Thomson Reuters. For the first quarter, Wall Street is expecting earnings of 34 cents a share on revenue of $9.35 billion.

Auguste Gus Richard, an analyst with Piper Jaffray, says in a research note:

We believe the PC market was strong in Q4 and expect this strength to continue into Q1 due to inventory restock in the US retail channel and Chinese New Year.

However, there are a few wild-cards following the Chinese New Year (Feb. 14) that may temper the outlook a bit. That lull is expected to be only temporary as the corporate PC refresh cycle begins in the second half, say analysts.

Oppenheimer analyst Rick Schafer adds that inventories appear to be well managed and Intel has the PC upgrade cycle and strong server performance to keep the solid results coming.

By our work, enterprise spending (back-half loaded) will be a key driver pushing overall PC unit growth close to 15% in 2010–nearly 2x normal. With almost 60% enterprise exposure, Intel appears uniquely positioned to benefit on the top line as well as gross margin line.

Schafer adds that the "stars are aligned" for a server upgrade cycle too in 2010.

Analysts across the board were upbeat about Intel. With that assessment the only remaining question is how much of this happy talk is already factored into Intel's share price.

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