March 16, 2010 / 6:35 PM / 8 years ago

UPDATE 2-Intel shares jump on talk of strong Q1 earnings

* Talk of Intel pre-announcing positive Q1 - analysts

* Shares up 4 percent (Adds analyst comments, updates shares)

By Ian Sherr

SAN FRANCISCO, March 16 (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.

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

Analysts said there was talk in market that the company could pre-announce strong results soon. [ID:nN13151343]

“There’s speculation that 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 on April 13.

Analysts on average are expecting 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.

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.

Broadpoint AmTech analyst Doug Freedman said Intel only considers pre-announcing earnings if senior management receives an update that is outside the company’s range by a certain degree.

Additionally, Freedman said, if the company’s revenues and margins are better than expected, those two factors could push the bottom line of estimates up by as much as 10 percent.

“I won’t be surprised by a positive pre-announcement, but I don’t know what guideline they would use to do that,” he said.

GOOD NEWS FROM CHINA

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.

“Although overall option volume in Intel is more active than usual, this could be attributed to the expiration of March options,” said William Lefkowitz, options strategist at brokerage firm vFinance Investments in New York. “Some traders might be rolling over their positions from March into the April contract.”

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.

Apart from talk of a strong first quarter, 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.

“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.

Those factors, along with Intel’s launch of new, more powerful server chips on Tuesday [ID:nN15204554], helped push the stock over its 52-week high.

Wedbush Morgan analyst Patrick Wang said that triggered a round of buying by hedge funds and other investors in semiconductor stocks.

The Philadelphia Semiconductor Index .SOXX rose nearly 3 percent to 359.87, while AMD stock shot up 5.38 percent to $9.40 on the New York Stock Exchange. Nvidia rose 3.5 percent to $17.76, Micron Technology Inc (MU.O) rose nearly 5 percent to $10.21, and Intel rose almost 4 percent to $22.01 on Nasdaq.

Additional reporting by Doris Frankel in Chicago; Editing by Richard Chang

Our Standards:The Thomson Reuters Trust Principles.
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