Semiconductor giant Intel Corp (NASDAQ: INTC) reported strong third quarter earnings after the market close today, sending shares up nicely in after-hours trading.
Going into this afternoon's earnings announcement, analysts had been expecting to see the chip maker show earnings of 34 cents per share, but the company was able to top analyst estimates by a penny, with a reported 35 cents per share.
The 35 cents that the company showed for its third quarter is not only impressive because it was above analyst estimates, but also because of how much stronger it was on a year over year basis. During the same period last year, the company had earnings of 30 cents per share.
A lot of attention in the market lately has been focused on the credit crunch and subsequent economic slowdown, and many investors have been left wondering if the overall slowdown had also impacted technology. Today's report should calm some of those concerns, but Intel did warn that it could see slowdown in demand in the fourth quarter.
The company stated that a big reason for the better-than-expected numbers were a result of improved gross margins. During its most recent quarter, the company had a gross margin of 58.9%, compared with 51.2% during the same period last year.
All in all, a great quarter for the company, and traders are rewarding the stock in after-hours trading, pushing shares up 4.5% after the news was released.
Michael Fowlkes has worked as a stock trader for seven years and spent the last four years working as an analyst for the online investment advisory service Investor's Observer.
"The decline in the price of Intel (NASDAQ: INTC) is disconcerting, but on balance, not a surprise," says tech guru Paul McWilliams.
Here, in his Next Inning newsletter, the advisor reassesses his forecast for Intel and the tech sector made at the start of the year, and his continued optimism for the stock's future performance.
"In January, I initially concluded that mature global economies were likely going to exhibit slow growth in 2008 and may dip through a recession.
"However, I also had forecast that emerging economies were large enough to where their contributions, even though they would also probably see some slowing in 2008, would keep aggregate growth high enough to avoid any serious worldwide macroeconomic pain.
"My conclusion was that while it is normal to expect spending by governments, businesses, and consumers to follow GDP patterns, there are what I saw then and still see now as good reasons to believe there would be a preference given for tech.
"In other words, my belief was then and still is today that spending on certain tech sectors would hold stronger than normal in the face of aggregate GDP slowing.
This post is part of a report entitled "Six-pack of technology favorites." You can read about the other top tech stock picks here.
"It's time to watch for buying opportunities -- and one of the companies on my personal list is Broadcom Corp. (NASDAQ: BRCM), whose shares are in buying range right now," says analyst Glenn Rogers.
The contributing editor to Gordon Pape's Internet Wealth Builder explains, "This semiconductor maker is a good choice for investors who would like to add to their information technology position with shares of a first-class company."
"Broadcom, located in Irvine, California, designs semiconductors for the wired and wireless communications industry. It is a major supplier to Apple's iPhone, which has taken the world by storm this past year.
"Specifically, it powers the brilliant display screen that has captivated users since the launch of the iPhone last year. (Full disclosure: I've just picked up my new 3G iPhone.)
"It also provides the chip that delivers the GPS navigation in the new iPhone. The company holds over 2,000 U.S. and foreign patents and has more than 7,400 pending patent applications.
"But Broadcom is not just an iPhone supplier. It also powers the Motorola TV set top boxes, Netgear wireless routers, Bluetooth and Blu-ray applications, digital television, VOIP, etc. There are lots of chipmakers out there but Broadcom operates in the areas that offer the highest growth potential and the least commoditization in this sector.
"Wall Street has recently been very negative about Texas Instruments (NYSE: TXN)," notes wireless sector expert Nikhil Hutheesing. In his Forbes Wireless Stock Watch, the advisor explains, "But things may not be as dire as they sounded last month and I think that with expectations down, the company will end up exceeding expectations in the second half of this year."
"One reason Wall Street has been negiative is that TXN's biggest wireless customer, Nokia, announced a fundamental shift, stating it would no longer depend mostly on Texas Instruments for its chips. Ericsson also said it had shifted to a multi-supplier strategy.
"Besides that, in April, at TXN's earnings conference, CEO Rich Templeton talked of a cloudy economy and said that his company had become become more conservative with its outlook for the second quarter.
"Meanwhile, I've spoken with a number of experts in the wireless area who tell me that orders for TI's chips are significantly higher for the second half of this year than they have been in previous years. These orders are even coming from Nokia. (So far, Nokia's muti-supplier strategy has not had an impact on Texas Instruments.)
Intel Corporation today announced record first-quarter revenue of $9.7 billion, operating income of $2.1 billion, net income of $1.4 billion and earnings per share (EPS) of 25 cents.
The earnings helped to propel the stock higher in after hours trading to the point where Intel is flirting with an almost 8% gain since the close of the regular session. The street was happy not to hear another piece of horrifying news and took notice of how well that Intel held up during this difficult economic environment. Even better, margins were up 4% YOY to a whopping 57% for the full 2008 fiscal reporting period. Much of this has to be a result of the key relationship that Intel has with Apple.
Probably one of the greatest technology deals of recent time has got to be the co-op of Apple/Intel/Microsoft. Finally thinking abut the bigger opportunity, these three giants approached the competitive landscape with a resolve to dominate. Since the day Apple's operating system allowed the running of Microsoft's Windows OS, there was no stopping the expansion. Intel's part in all of this was also key. By producing a chip that would help bring these two behemoths together, it has been rising a nice wave of income. No longer does Intel have the same competition as it did only a few years ago.
Intel Corporation (NASDAQ: INTC) announced its first quarter (Q1) earnings today. Intel, the world's largest maker of computer chips, made some 25 cents a share, or some $1.44 billion. The higher than expected revenue of $9.67 billion, however, beat out analyst's expectations, which is probably why shares in after-hours trading have been trending upwards. This same time last year Intel saw $1.64 billion and 28 cents a share, demonstrating that Intel is feeling the economic pinch that everyone else is, despite beating expectations.
All in all, that's a 12% drop in year-over-year profits when comparing the same quarter.
Next quarter Intel is expecting $9 to $9.6 billion in sales.
The choppy/consolidating (or perhaps worse) market conditions sometimes give the impression that growth plays do not exist, but that is not the case, and one growth company worth reviewing is Texas Instruments.
Texas Instruments (NYSE: TXN) is the world's third largest semiconductor company, with operations in more than 25 countries.
In general, analysts see TXN's revenue increasing 5-8% in 2008, with the company likely to increase its leading market share in the analog segment; a smaller annual revenue increase is expected in the handset digital segment. Further, analysts say TXN is well positioned to benefit from increasing use of higher-end analog products. Meanwhile, higher plant utilization and a recent restructuring should aid TXN's bottom line. The Reuters F2008/F2009 EPS consensus estimates for TXN are $2.09/$2.31.
In an effort to keep bottom-line growth alive, Intel is trying (again) to move into the mobile phone market. Speaking from the Consumer Electronics Show in Las Vegas, the Pentium parent's CEO, Paul Otellini, told Bloomberg that Intel is focused on "where we think phones are going, not where they are today."
Last year, Otellini put to rest his predecessor's $5 billion, six-year effort to produce mobile-phone chips designed to run the communications features of cellular phones. Now, the Intel CEO is taking a different approach to the new marketplace, designing chips for phones that can surf the web and master mobile video and music. The goal for the new chip is to provide increased processing power while exerting less electricity.
In the first half of 2008, Intel will be unveiling its package of mobile chips. A successful shift toward this technology could be a boon for the company, as mobile handsets currently outsell personal computers by a 4-to-1 margin.
Two of the digital-age growth trends include semiconductors and solar power, so when one can potentially capitalize on both in one stock, it makes for an appealing investment opportunity. MEMC Electronic Materials does just that.
MEMC Electronic Materials (NYSE: WFR) designs, manufactures and provides wafers and intermediate products for use in the semiconductor, solar and related industries.
Analysts see 2008 revenue increasing 20-30% after a likely solid 23-27% increase in 2007. Backorders also are impressive. Meanwhile, the sector's outlook provides additional cause for optimism, with solid demand for both solar wafers and semi wafers seen in the immediate years ahead.
Shares in chip-maker Micron Technology, Inc. (NYSE: MU) are trading higher on rumors that Samsung Electronics may buy part of their business. The South Korean Electronics giant is denying the report. Micron Technology of the U.S. is the world's leading producer of CMOS image-sensing chips. Micron three years ago invested heavily in image-sensor chips as a hedge against fluctuations in demand and prices of memory chips. Business has been very week as prices for these chips have plummeted. That being said, chip-makers have started cutting production to create better pricing.
Morgan Stanley (NYSE: MS) analyst Atif Malik said he understood why investors are getting excited about a potential price rebound for Micron shares as chip makers are starting to cut production in some less-profitable types of chips.
While Samsung denies the rumors, I wouldn't be surprised if a deal gets done. Why? Because in October Samsung bought Israeli non-memory chip developer TransChip Inc. to help strengthen its research and development capability in the CMOS chip business.
With Micron shares down more than 35% from their 52 week high, Samsung would be able to establish a real foothold in this business for cheap.
Aaron Katsman is the lead Portfolio Manager and Managing Director of America Israel Investment Associates, LLC. and Senior Editor of IsraelNewsletter.com. Disclosure: Writer has no position in any stock mentioned as of 12/6/07.
Up until the stock market bubble burst, many viewed the semiconductor sector as a leading indicator for other technology shares. Lately, however, the relationship has gone signficantly awry.
Since the year began, the Philadelphia Semiconductor Index -- which has an equivalent exchange-traded fund, the Semiconductor HOLDRs Trust ETF (AMEX: SMH) -- has lost 3.4%, trailing far behind the 25.5% rise in the Nasdaq 100 index -- which has an equivalent exchange-traded fund, the Powershares QQQ Trust ETF (NASDAQ: QQQQ) -- as well as the 8.6% gain in the S&P 500 index.
Although many technology stocks have been boosted by the prospect of strong overseas growth and momentum-driven buying, semiconductor shares have been under a great deal of pressure, hurt by disappointing earnings and outlooks from companies like KLA-Tencor (NASDAQ: KLAC) and SanDisk (NASDAQ: SNDK), along with persistent talk of a chip glut.
Toshiba Corp. (OTC: TOSBF) saw quarterly operating profit increase of 38% for its latest quarter, due to increases in the sale of flash memory chips and nuclear power plants, according to the Japanese electronics conglomerate. Toshiba is the world's second-largest maker of flash memory chips (the NAND design) behind South Korean competitor Samsung Electronics, and such a large quarterly increase be a telltale sign for the consumer electronics industry.
For example, the storage needs of the world continue to explode every year, but more and more of that insatiable need is being requested by consumers instead of corporate data centers. The form of storage, though, is required to be portable, energy-efficient and super-tiny (think Apple iPod Nano). The solution? NAND flash storage, where Toshiba is a huge player. Apple Inc.'s (NASDAQ: AAPL) iPod line (not the larger, hard drive-based units) and almost every cellphone sold worldwide use some kind of NAND flash storage. As cellphones continue displacing landline phones and grow in capability with portable video and audio players, my guess is that NAND manufacturers will see even brighter days than they have already seen.
Now, here's the sticky part: Toshiba expects NAND prices to fall about 20% in the October-December quarter as the annual price decline continues in that market. Add an annual 50% price decline into the picture and it could strike some as odd. It's not -- this is standard operating procedure considering the supply-demand dynamic taking place. In addition to the red-hot NAND market, Toshiba's division responsible for nuclear reactor building (that's a change, no?) expects an operating profit for the year to come in at over $2.54 billion. Toshiba's largest competitor in that commercial space is General Electric (NYSE: GE).
Advanced Micro Devices (NYSE: AMD) -- a major name in the chip sector and the leading rival of the 800-pound Intel (NASDAQ: INTC) gorilla -- slinked into the earnings confessional Thursday to report third-quarter losses that were broader than expected. Specifically, the firm posted a net loss of $396 million, or 71 cents per share.. In its year-ago period, AMD banked a per-share profit of 27 cents per share, equal to net income of $136 million.
What's more, the loss was 9 cents wider than the 62-cent loss projected on Wall Street. While earnings excluding items were not reported, AMD did note that many analysts' estimates failed to account for the $120 million -- 22 cents per share -- in costs that the company swallowed relating to its $5.6 billion acquisition of ATI Technologies. So when this is taken into account, the picture isn't quite as bad.
LSI Corporation (NYSE: LSI) designs, develops and markets semiconductors used by original equipment manufacturers in the data networking and consumer electronics markets. It also provides a wide variety of storage systems, sub-assemblies, and storage management software applications. In August, the firm signed a definitive agreement to sell its mobility products business to Infineon Technologies (NYSE: IFX) for $450 million in cash and a $50 million performance-based payment. The sale was the result of a strategic realignment, following LSI's April merger with Agere Systems. Top clients include Hewlett-Packard (NYSE: HPQ), IBM (NYSE: IBM) and Sony (NYSE: SNE).
The stock has been a steady gainer over the past two months, in response to such issues as the mobility products sale, a new $500 million stock repurchase program, the sale of semiconductor assembly and test operations in Thailand, the acquisition of fabless chip producer Tarai, new product announcements, and generally favorable analyst commentary. Shares have been advancing through a positive trading channel. The price is currently positioned at the base of that channel, suggesting the potential for a turn back toward the top.
Brokers recommend the issue with three "strong buys," four "buys," five "holds" and a "sell." Analysts estimate a 110% growth rate, through the next year. The LSI Price to Sales ratio (2.49), Price to Book ratio (1.12) and Sales Growth rate (36.82%) compare favorably with industry, sector and S&P 500 averages. Institutional investors hold about 86% of the outstanding shares. The stock is one of those used to calculate the S&P 500 Index. Over the past fifty-two weeks, it has traded between $5.99 and $11.08. A stop-loss of $6.35 looks good here. Note that the firm is next expected to report quarterly results on October 24, after the close.
Semiconductor giant Intel Corp (NASDAQ: INTC) reported strong third quarter earnings after the market close today, sending shares up nicely in after-hours trading.
In an effort to keep bottom-line growth alive, Intel is trying (again) to 
Up until the stock market bubble burst, many viewed the semiconductor sector as a leading indicator for other technology shares. Lately, however, the relationship has gone signficantly awry.
My recent 
Advanced Micro Devices
a new $500 million stock repurchase program, the sale of semiconductor assembly and test operations in Thailand, the acquisition of fabless chip producer Tarai, new product announcements, and generally favorable analyst commentary. Shares have been advancing through a positive trading channel. The price is currently positioned at the base of that channel, suggesting the potential for a turn back toward the top.
Waiting for the other shoe to drop: The looming credit crisis
Closing Bell: Dow down 7.7%; GE, YHOO, MS fall, PGI, MNT soar
Bet on T&A with J&J (JNJ)
