Intel Bullish

With Intel reporting a healthy Q1 that met analyst estimates, the market breathed a sigh of relief. Earlier coverage is available here (effect of the iPhone) and here (multi-core trends).

Q1 revenue was $9.7 billion, up 9% driven by demand for its edge processors and chipsets. Analyst estimates were earnings of $0.25 on revenue of $9.63 billion. Net income was $1.4 billion or $0.25 per share, down 12%. Restructuring and asset impairment charges of $329 million reduced the EPS by 4 cents. These charges included $275 million for NOR Flash divestiture to Numonyx. It spent $1.5 billion on R&D and $1.4 billion on marketing and administrative in the quarter. Cash investments amounted to $13.2 billion. Intel bought back stock worth $2.5 billion and paid $740 million in dividends. The number of employees is down by 1,700 to 85,000.

Segment-wise, Digital Enterprise Group had revenue of $5.3 billion, up 13% y-o-y and down 7% q-o-q. Microprocessor revenue was $4.1 billion and the strength in this business is offsetting the weakness in the NAND market. Mobility Group had revenue of $3.7 billion, up 12% and down 10% q-o-q. The sequential decline is seasonal as the first quarter is typically slow after the holiday season. Region-wise, Asia Pacific had revenue of $4.8 billion (50% revenue), Americas had $2 billion or 21%, Europe had $1.9 billion or 19% and Japan had $1 billion or 10% total revenue. Strong demand for the 45-nanometer server products led to growth of 17% in Americas.

For Q2, Intel is bullish and expects revenue between $9 and $9.6 billion, a growth of 7% and well above analyst expectations. NOR Flash revenue is expected to be about $100 million through a supply agreement with Numonyx. By the year-end, NOR revenue will be declining to $50 million per quarter. On April 10, Emcore announced plans to acquire enterprise and storage assets of Intel’s Optical Platform Division.

One of the key macroeconomic factors playing in Intel’s favor is the weakening dollar and its effect on the emerging markets. PCs are becoming more affordable.

Intel’s stock is trading around $22. It has recovered from the sharp drop in January down to a 52-week low of $18.05.