Intel, global chip shares jump

SAN FRANCISCO Wed Mar 17, 2010 6:23am EDT

Paul S. Otellini, President and CEO of Intel Corporation, delivers his keynote speech at the 2010 International Consumer Electronics Show (CES) in Las Vegas January 7, 2010. REUTERS/Mario Anzuoni

Paul S. Otellini, President and CEO of Intel Corporation, delivers his keynote speech at the 2010 International Consumer Electronics Show (CES) in Las Vegas January 7, 2010.

Credit: Reuters/Mario Anzuoni

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SAN FRANCISCO (Reuters) - Shares of Intel Corp (INTC.O) jumped 4 percent to their highest in more than a year on expectations that robust Asian sales and a rebound in corporate spending will help the chipmaker beat current-quarter earnings estimates.

The rally propelled gains in other semiconductor stocks, with Advanced Micro Devices Inc (AMD.N) and Nvidia Corp (NVDA.O) both rising more than 3 percent, while technology shares in Taiwan, Japan and South Korea followed the gains in Wednesday trading.

In January, Intel forecast first-quarter revenue and margins above Wall Street expectations as demand for personal computers from corporations rebounded after years of stretched budgets and belt-tightening.

Now, analysts say, there is talk in the market the company could pre-announce strong results soon.

"There's speculation Intel will have a positive pre-(announcement)," Auriga analyst Daniel Berenbaum said.

Intel spokesman Chuck Mulloy declined to comment and said the company was in a quiet period ahead of its first-quarter earnings announcement due on April 13.

Analysts also cite the Chinese New Year in February -- a season of high spending in China -- as a reason for robust sales, especially in computers, in the world's No.3 economy.

The Asia-Pacific region, excluding Japan, accounts for roughly three-fifths of Intel's revenue. Wedbush Morgan analyst Patrick Wang said there had been concerns about inventory build up and poor sales leading up to the Chinese holiday.

But sales remained strong, pushed in part by Chinese government programs to spur consumption of everything from cars to household appliances. Beijing is encouraging scores of technology upgrading projects as part of an effort to spur spending on electronics, among other initiatives.

Analysts on average expect Intel to report a current-quarter profit of 37 cents per share on sales of $9.79 billion, according to Thomson Reuters I/B/E/S.

Optimism over a strong outlook helped lift technology shares across Asia, with Samsung Electronics (005930.KS), the world's No.1 memory chip maker, up 2.1 percent and 2nd-ranked Hynix Semiconductor (000660.KS) gaining 1.7 percent.

In Japan, chip equipment maker Tokyo Electron (8035.T) rose 1.2 percent and Advantest (6857.T), which supplies testers to chip makers such as Intel, gained 1 percent.

Taiwan's electronics sub-index .TELI gained 1.4 percent, with AU Optronics (2409.TW), a supplier of LCDs for computers and flat-screen TVs, jumping 2.9 percent, and PC memory chip maker Inotera (3474.TW) up 1.2 percent.

"Demand is very strong right now, and we're also seeing signs of a recovery in chip demand in the U.S. and Europe," said Tiffany Chen, a Taipei-based analyst with KGI Securities.

"The second quarter is usually the quiet season for most tech companies, with revenues down about 10 percent sequentially, but this year we're likely to see it drop less than that because of returning consumer demand."

WORRIES UNFOUNDED?

Some worried that margins may have peaked in the current cycle, but analysts say strengthening demand may help propel Intel's earnings power further.

Broadpoint AmTech analyst Doug Freedman said that if Intel's revenues and margins are better than expected, the bottom line of estimates could be pushed up by as much as 10 percent.

Intel's share rally was accompanied by unusually high volume in the options market.

Options traders exchanged about 244,000 contracts in Intel -- three times the normal level, according to option analytics firm Trade Alert. The volume was led by the trading of 204,000 call contracts, as many traders rolled their bullish positions from soon-to-expire March options to the April options.

March options expire on Friday after the close.

Intel shares have steadily risen this year, by nearly 4 percent as of Monday. Tuesday's rally sent the stock to the highest level since September 2008, when markets began spiraling downward during the financial crisis.

"Our contacts roundly hailed the PC sector as likely to be robust for the remainder of the year," FBR Capital Markets analyst Craig Berger said in a recent note to investors.

Many industry executives and analysts say there were signals early in the year of a strong return of spending by companies to upgrade equipment and software, though some expect growth to sharpen only in the latter half of 2010.

Robert W. Baird analyst Tristan Gerra said he was seeing strong sales of corporate notebooks. That, along with strong forecasts from top-tier manufacturers and strong sales of Intel chips released in January were pushing shares higher even though gross margins may have peaked.

Intel launched new, more powerful server chips on Tuesday.

"Intel has the strongest product portfolio in years," Gerra said.

The Philadelphia Semiconductor Index .SOXX rose nearly 3 percent to 359.87. AMD stock gained 5.4 percent to $9.40 on the New York Stock Exchange, while Nvidia rose 3.5 percent, Micron Technology Inc (MU.O) rose nearly 5 percent, and Intel advanced almost 4 percent on Nasdaq. (Additional reporting by Doris Frankel in CHICAGO, Kelvin Soh in TAIPEI, and TOKYO, SEOUL bureau, Editing by Edwin Chan and Ian Geoghegan)

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