Is Intel About to Cut Its Guidance?


Intel (NAS: INTC) may have its hands in a lot of pots, but its fortunes are still heavily tied to the broader PC market, which you may have heard isn't doing so hot lately. Just last week, researcher IDC trimmed its outlook for the PC market, expecting just 0.9% growth throughout 2012 as midyear shipments are lagging. Intel's PC client group comprised nearly two-thirds of sales, so its fate remains inextricably linked to the health of the PC market.

Domestic PC partners Dell (NAS: DELL) and Hewlett-Packard (NYS: HPQ) both put up unimpressive quarterly PC results this month. Dell saw its mobility segment sales, which includes laptop PCs, plunge 19%, while desktop PC revenue fell 9%. HP's personal systems group reported desktop units falling 6% and notebook units dropping 12%, leading to an overall unit decline of 10%.

A number of analysts were out recently with cautious comments on Chipzilla's near-term quarters. Davenport & Co. analyst Drake Johnstone thinks the company will miss consensus estimates for not just one, but the next two quarters.

Citigroup analyst Glen Yeung also notes that the PC supply chain is deteriorating because of a number of factors, including broader macro weakness, tablet cannibalization, and slow sales ahead of Microsoft's (NAS: MSFT) Windows 8 launch. Yeung still rates Intel a "buy" but trimmed a few bucks off his price target to $32. He also believes that "the potential for pre-announcement is high."

JPM Securities analyst Alex Gauna doesn't believe Windows 8 will help the state of the PC market much, reducing his full-year earnings and revenue estimates. Sterne Agee analyst Vijay Rakesh similarly thinks investors will be let down by the performance of Windows 8, considering intensifying competition from other mobile devices.

That means were talking about four separate analysts who have revised estimates downward. Remember, though, that the market tends to trade relative to expectations, so toned-down expectations might actually soften the blow if Intel has a weak quarter.

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