Track the companies that matter to you. It's FREE! Click one of these fan favorites to get started: Apple; Google; Ford.



Intel Tripped Up

Some earnings reports are so predictable you can set your watch to them. You know the ones I'm talking about: the uber-profitable monsters that always beat Wall Street's estimates. The two titans of computing -- Microsoft (Nasdaq: MSFT  ) and Intel (Nasdaq: INTC  ) -- have been among this group for years. Last summer, Mr. Softy finally came up short. Yesterday, it was Intel's turn when the chip maker missed the Street's earnings-per-share prediction by a penny in its first-quarter 2004 results.

Missed estimates always make for big news on Wall Street, especially when a stalwart like Intel is involved. Predictably, investors dumped Intel shares in after-hours trading, sending the stock lower by 1.5%. Of course, if you asked any of these investors what about Intel's business caused them to suddenly run for the door, the answer is likely to be something like "they reported bad news" or "the stock was going lower; I didn't want to lose money."

Folks, that's a very un-Foolish reaction. Let's take a look at the numbers. Net income for the first quarter was $1.7 billion, or $.0.26 a share, up 86% from the same period a year ago. That's a blowout quarter by almost any measure, except that the Street expected $0.27 a stub. What caused the shortfall? Intel took a $162 million charge against its cost of sales, created when it agreed last month to pay $225 million in a patent infringement settlement with Intergraph (Nasdaq: INGR  ) . Intel says the deal impacted per-share earnings by roughly $0.017.

To be sure, there are real reasons for concern over Intel. Heck, I've documented a couple of them, such as its mid-quarter revenue adjustment and its choice to followAdvanced Micro Devices (NYSE: AMD  ) in introducing 32-bit and 64-bit combination chips. But if not for these issues, and Intel's documented problems getting its latest Pentium 4 chips into the hands of Hewlett-Packard (NYSE: HPQ  ) and Dell (Nasdaq: DELL  ) , I'd be tempted to buy the stock.

Predictions aside, what's most important about yesterday's earnings report is the lesson it provides. Part of the job of researching stocks -- and it is work -- requires knowing when news that looks bad is actually good. And vice versa.

So, how do I view Intel's unmet expectations? To borrow from our muse, William Shakespeare, it's much ado about nothing.

Don't want to do the heavy lifting in your investing? No sweat, we're here to help. Dell Computer is one of David Gardner's picks forMotley Fool Stock Advisor, and he's slapping the market silly. Join David and brother Tom in trouncing Mr. Market. Give Stock Advisor a free test drive for six months.

Fool contributor Tim Beyers sometimes misses his wife's estimates for when he'll take out the trash. He owns no stake in any of the companies mentioned, and you can view his Fool profile here.

Read/Post Comments (0) | Recommend This Article (0)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 506976, ~/Articles/ArticleHandler.aspx, 10/28/2016 2:41:38 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated 5 hours ago Sponsored by:
DOW 18,169.68 -29.65 -0.16%
S&P 500 2,133.04 -6.39 -0.30%
NASD 5,215.97 -34.29 -0.65%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

10/27/2016 4:00 PM
AMD $7.11 Down -0.18 -2.47%
Advanced Micro Dev… CAPS Rating: **
DELL.DL $0.00 Down +0.00 +0.00%
Dell CAPS Rating: *
HPQ $13.99 Up +0.08 +0.58%
HP CAPS Rating: ***
INTC $34.81 Down -0.11 -0.32%
Intel CAPS Rating: ****
MSFT $60.10 Down -0.53 -0.87%
Microsoft CAPS Rating: ****