Intel's Q1: Solid results, outlook, but wild cards linger

Will Intel's first half of 2012 outshine the second even with a Windows 8 launch on deck? Some analysts are betting that way.
Written by Larry Dignan, Contributor

Intel's first quarter appears to have weathered the hit from hard drive shortages and the outlook for the next three months should be fueled by launch of its Ivy Bridge processor, according to analysts.

The wild card for Intel is the second half of 2012.

Wall Street is expecting Intel to report first quarter earnings of 50 cents a share on revenue of $12.84 billion. For the second quarter outlook, Wall Street is expecting earnings to jump to 55 cents a share on revenue of $13.45 billion.

Piper Jaffray analyst Auguste Gus Richard said Intel will have two things in its favor for the first and second quarters. Hard drive shortages are getting better and that means Intel can move more systems (and the chips that go with them). Meanwhile, Intel's launch of its new Ivy Bridge processor will fuel systems.

However, Richard is down on Windows 8 and its ability to fuel Intel demand in the future. He said:

The company likely expects rising volumes from Windows 8 and other ramps to offset any depreciation hit. We are not as optimistic about Windows 8 as a demand driver in the second half.

In other words, Richard is worried that Intel ramped up capacity in anticipation for Windows 8 demand that may not come.

Other analysts were more constructive on Intel, but note a bevy of wild cards ahead. Among the big ones:

  • Mobile. Can Intel claw its way into the smartphone market and grab demand 
    from ARM-based processors? Wells Fargo analyst David Wong said that Intel could capture about 10 percent or more of the smartphone market over time and 30 percent of the non-Apple tablet market. Wong's bet, however, may depend on the reception of Microsoft's Windows 8 efforts.
  • Ultrabook demand. Intel may benefit from the build of ultrabooks. The challenge: Intel's future growth will depend on the sell through, said Evercore analyst Patrick Wang. Meanwhile, ultrabooks are too pricey with an average price of $999. In a research note, he said:

Much of the first half upside is being driven by product builds and downstream inventory restocking for IVB and Ultrabooks (think retail). But in order to sustain this momentum, we’ll need to see demand pick up to digest this inventory.

  • Inventory correction? Analysts said that there could be an inventory correction for processors and notebook builds ahead of the Windows 8 launch.

The lock for Intel in 2012 may be server sales. With new chips in the pipeline, Intel appears to be unstoppable. As long as Intel can rake in cash on servers, those wild cards are manageable.

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