Wall Street preps for Intel outlook

The chipmaker will brief analysts on its second-quarter outlook after the market closes Thursday. While the meeting is not expected to be revelatory, as Goldman Sachs analyst Terry Ragsdale put it, "We don't see how the news can be good."

"The best news we can hope for is that Intel reconfirms its original guidance for revenues to be in a range of up 2 percent to down 7 percent sequentially," he said.

But analysts don't put too high a bet on that happening. Montgomery Securities analyst Douglas Lee wrote in a research note that he anticipates Intel narrowing its expected revenue range, currently at $6.2 billion to $6.8 billion. However, he added that he does not expect a dramatic revision to that range.

Intel will post formal results for the quarter on July 17. The mid-quarter update is a new program for the company.

Intel shares were off 24 cents to close at $28.50 on Monday.

While analysts said that the sluggish PC market would continue to take a toll on the company, they nonetheless found good things to say about Intel.

"Although we do not dispute the slowing growth rate of the PC market, we view Intel as an excellent investment on the next PC market recovery," wrote Bear Stearns analyst Charles Boucher. Nonetheless, Boucher trimmed his earnings estimate for the second quarter from 11 cents per share to 10 cents per share, and dropped his 2001 estimate from 55 cents per share to 52 cents per share.

Beyond the PC issue, Boucher pointed to an aggressive pricing campaign Intel has begun for its Pentium III and Pentium 4 chip families. Intel's third quarter will be a critical one for its products. The company will begin the quarter with the first shipments of its 0.13-micron Pentium III processors and will later release 2GHz Pentium 4 chips.

Boucher said that Intel may be using pricing pressure to "forestall further market share loss until it can introduce higher performance Pentium 4 family members."

Intel vs. AMD
In fact, analysts seemed to be placing their bets on Intel to come out ahead of AMD in the battle for market share.

Intel has already begun production shipments of its new 64-bit Itanium processor for workstations and servers. The company also started a marketing campaign late in the second quarter, hoping to stimulate demand for its Xeon and Itanium processor products among corporate customers.

"Yes, AMD has gained notable market share from Intel over the past couple of quarters, and both stocks reflect that fact," Ragsdale wrote. "It's not such a stretch to believe that this trend can turn the other way over the next couple of quarters."

That reversal may have already begun.

"Based on our channel checks, we believe AMD has lost some momentum in the current quarter, due to a combination of Intel's aggressive price cuts and marketing efforts, as well as a slight inventory build in the March quarter," Lee wrote.

"AMD is also more exposed to the consumer channel, with very little presence in the corporate, server and notebook market. Finally, we estimate roughly half of AMD's profits last quarter came from flash memory sales, an area where pricing continues to present downside risk. We believe AMD could see a more significant downward earnings revision and would avoid the stock in the near-term," he wrote.

AMD shares closed trading Monday at $27.61, down $1.99.