Shares of health care giant Intel Corporation (NASDAQ: INTC) have been selling off in after hours trading, following the company's first quarter earnings announcement.As we discussed in our earnings preview, analysts had been looking to see the company show first quarter earnings of 2 cents per share, but the company surprised to the upside, with a reported 11 cents per share. Despite this good news, the stock has dropped around 3.5% in after hours trading.
In addition to the stronger than expected earnings, the company's CEO, Paul Otellini, tried to assure investors by stating that demand had already bottomed out, and that the industry is recovering.
So why is the stock selling off this afternoon? Basically Wall Street wanted to hear some sales guidance for the current quarter, but were not given that information. It did provide informal guidance that second quarter revenue would probably be flat compared to the first quarter.
Gross margins were lower on a sequential basis, dropping to 45.3% in the quarter as opposed to 53.9% during the company's fourth quarter. Looking ahead at the current quarter, Intel estimated that gross margin would once again be in the mid 40s.
It will be interesting to see just how Wall Street treats the stock once normal trading opens up in the morning. Should Wall Street focus on its better than expected earnings, or worry about the informal revenue guidance? Let us hear your thoughts on this earnings release.
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Reader Comments (Page 1 of 1)
4-14-2009 @ 6:41PM
Dean said...
I can't figure out why the stock price dropped even though there was good news, but not the news they want to hear. Give me a break...11 cents/share?! I am an adjunct professor at a private university in Denver. I teach graduate accounting and finance. I use public companies and the stock market to help me teach my classes. But, when I go to class and the students ask me about things like this, I can't explain it.
The next class will be interesting.
4-14-2009 @ 7:07PM
Iridium said...
It is simple. Intel should not have done as well as it did. Someone used some funny accounting. Many analysts overshot expectations to the downside. Traders are now realizing this. Instead of the market going up 500 points when a company beats extremely low forecasts, they might be getting a brain and focusing on how bad the earnings really are in comparison to the real economy.
Also Intel was only able to generate revenue off of the Atom processor that showed up in a whole lot of netbooks. Nvidia's ION platform is going to give Intel a lot of headaches in the low end business range. Margin is key in that segment and the Atom is far too expensive in cost/performance.
The next netbooks will have to do all sorts of video decoding becoming the replacement for protable DVD players. Intel's integrated chipsets are terrible for this sort of thing.