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Intel shares slip into predictable pattern

Shares of Intel Corp. (Nasdaq: INTC), which made $2 billion last quarter, have quietly fallen to around $50 a share. But before you start panicking, consider this early summer slide has historically provided an excellent buying opportunity.

Intel shares fell another 5/16 to 52 9/16 Wednesday, well off the stock's 52-week high of 71 13/16 set in January.

After its 2-for-1 stock split in April, the stock went on brief run before falling back below the split-adjusted price.

As PC demand and chip production fades in the late spring and early summer, these stocks tend to go into their own hibernation. In fact, in each of the past five years Intel shares have lost between 20 percent to 45 percent of their value in the months of April, May and June before rallying back in September and October.

Intel itself is partly responsible for the stock's malaise of late.

After hurdling analysts' estimates in its first quarter, Intel offered its typically cautious outlook for the second quarter.

Intel said it expects sales to be "flat to slightly lower" in the second quarter with gross profit margins falling from 59 percent in the first quarter to 57 percent.

In the first quarter, Intel earned $2 billion, or 57 cents a share, on sales of $7.1 billion. That $7.1 billion was a bit lower than most analysts' expected.

"Right now, it's just a summertime thing," said Chris Chaney, an analyst at A.G. Edwards. "Pricing is down and there's no signs that PC demand is picking up. It happens every year at this time."

Last year, Intel shares fell to a 52-week low of 65 5/16 in June before surging up to more than 142 in January. Not a bad profit for a company like Intel in just over six months.

"This is a great buying opportunity," Chaney said. "We've got a 12-month price target of $85 a share. As Intel gets more involved in the networking market, their profits are going to soar."

Intel is especially attractive right now because it's trading at a price-to-earnings ratio of 27.40, downright cheap by technology-stock standards.

With competitors such as Advanced Micro Devices Inc. (NYSE: AMD) and National Semiconductor Corp. (NYSE: NSM) far behind and losing ground, Intel can afford to cut prices in the low-end market while continuing to bang out those high-margin chips for the discriminating customer.

First Call consensus expects Intel to earn 54 cents a share in its second quarter and $2.33 a share in the fiscal year.

In the year-ago period, it made $1.17 billion, or 66 cents a share, on sales of $5.92 billion. "Intel is really good at making money," said Dan Scovel, an analyst at Fahnestock & Co. "But the PC environment is really challenging right now."

Thirty-one of the 38 analysts following the stock maintain either a "buy" or "strong buy" recommendation.