Investors to Eye Intel's Earnings for Signs of a Recovery

When the market closes Tuesday, all eyes will be on the world's largest chip maker, and investors are hoping for some good news.

Last year, Intel (INTC) got hammered by both the economic downturn and sluggish sales of personal computers, which has historically been the company's cash cow. Revenue for the year slipped nearly 7% to $35.1 billion; and income fell 17% to $4.4 billion. For the first quarter, though, investors and industry watchers are optimistic that a recovering economy could boost computer sales, which would help fatten Intel's bottom line.

Analysts expect earnings of 38 cents per share, ranging from 35 cents to 41 cents, according to a Thomas Reuters survey. Revenue is expected to come in around $9.83 billion, according to the consensus estimate.

Also, sales numbers from the Semiconductor Industry Association might not have given investors reason to get excited. Chip sales in February slipped 1.3% sequentially to $22 billion in February. Sales of chips for PCs and mobile phones were in highest demand for the month. (The SIA, incidentally, still thinks there could be some upside for the group's full-year forecast.)

Encouragingly, Gartner Group, a market research firm, also recently upped its forecast for a sharp rise in information technology spending for the year, spurred in part by strong personal computer sales -- more specifically, sales of consumer laptops. The group now expects IT spending to increase 5.3%, led by computer hardware spending, which is expected to grow 5.7% to $353 billion.

If investor sentiment means anything, Intel had a ho-hum quarter -- shares were basically flat for the three month period. But in March, the stock enjoyed a mini-rally climbing about 7%.

Next up to deliver earnings will be Intel's arch nemesis Advanced Micro Devices, which is scheduled to post earnings on Thursday.