Not only is Microsoft Corp. (NASDAQ: MSFT) feeling the hurt of the slumping PC industry, the leading chipmaker is also weathering the effect. In fact, Intel Corp.'s (NASDAQ: INTC) chip inventory has become so high that it may have to build new factories out of that silicon instead of selling those chips to, well, anyone.

Businesses have cut back spending on new gear that includes Intel processors, and consumers have flocked to bargain-priced netbook PCs since late 2008. Although Intel chips power almost all of those new machines, the Atom processor inside almost every one of them is not really a high-margin product. Nor can those sales make up for the overall downward sales trend in desktop and laptop PCs, and corporate servers.

What is a chipmaker to do? It's sort of like the inventory glut the automotive industry is facing. Large global manufacturing outfits can't just stop manufacturing nearly as fast as consumer tastes and sales dictate. So, when the economy tanks and credit lines become tight, the consumer and business money spigot can turn off almost overnight.

Those factories can't, though. Intel's sale of a lower-priced, non-advanced chip for these $350 netbook PCs won't be able to help it sell all those other higher-margin and unwanted chips. At some point, fire sales of chips will occur, and then we'll really see laptop PC prices and small servers much cheaper than they are now. Will anyone buy them then? Who knows.

Intel Corp. (NASDAQ: INTC) should hit the $0.40 EPS expectation when it reports Q4 results next Tuesday even as more doom-and-gloom is posited about the PC industry's demand slowdown. Intel, the world's largest microchip maker, is expected to see a 12% rise in revenue for its latest quarter to $10.84 billion, compared to $9.69 billion from the year-ago period.

Analyst houses like Citigroup have said that "pockets of PC demand weakness" do indeed exist, but overall PC trends (demand) are solid. This equates to Intel doing just fine next Tuesday. My guess is that the chipmaker will report above-average earnings of $0.41 EPS, just a penny higher than the consensus estimate. The ability of Intel to have lower-cost chips for PCs available during the last quarter of 2007 (holiday shopping season) will give Intel a boost as well.

Intel has also been taking back share lost to rival Advanced Micro Devices, Inc. (NYSE: AMD), who is widely expected to report a quarterly loss next week when it reports its Q4 numbers. If Intel, who was just recently under the gun of AMD in 2006 in terms of performance, can sock it up and really blow the doors off of Q4 estimates, 2008 will indeed appear rosy for the chipmaker. Intel's international markets will also help it weather any demand sluggishness in the U.S., even as customers snap up laptop PCs left and right this coming year.

Monster Worldwide Inc. (NASDAQ: MNST) -- September options active on renewed buyout chatter. MNST is recently up 68 cents to $33.87 on renewed and unconfirmed takeover chatter. MNST September 35 calls have traded 96 times on transaction volume of 4,374 contracts above its open interest of 3,450 contracts. MNST September 35 straddle is trading at $2.30. MNST October option implied volatility of 45 is above its 26-week average of 41 according to Track Data, suggesting larger risk.

Intel Corp. (NASDAQ: INTC) -- will hold its INTC Developer Forum in San Francisco on September 18-19. American Technology says, "we expect the company to focus on 45 nanometer process development, mobility as a driver of unit growth, and new areas of growth such as WiMax." INTC over all option implied volatility of 33 is above its 26-week average 29 according to Track Data, suggesting larger risk.

Daily options Update is provided by Stock Specialist Paul Foster of theflyonthewall.com.