Intel Up 2.4% Ahead of Earnings: Here Are 3 Areas to Watch Tonight

After the bell today, Intel's (INTC -0.22%) reporting, and optimism's not on the docket. In early September the company took a big mulligan on this quarter's projected sales, moving them down to a midpoint of $13.2 billion after previously giving guidance ranging from $13.8 billion to$14.8 billion.

Ouch. That's a big miss. Here's what analysts are expecting from the company along with some comparable recent performance. 

Source: Yahoo! Finance

That's an expected sales drop-off of 7.1% and an earnings drop-off of 23%. That stands in stark contrast to Intel's performance over the past three years, when it has been averaging sales growth of 17.5% per year. Earnings had been seeing even greater growth as margins expanded. 

That trend looks to be stopped in its tracks this quarter. Intel's finally succumbing to weakness in the PC industry. Likewise, rival Advanced Micro Devices (AMD 2.88%) just issued abysmal forward earnings guidance and is reportedly looking to lay off up to 30% of its workforce. 

Looking ahead, there are bright spots on the horizon. Microsoft's (MSFT 1.45%) Windows 8 is finally set to finally hit on Oct. 26th, which could provide holiday relief for the two companies. In addition, Chinese New Year is next February. That's a huge spending event in the country, and China has become the world's largest PC market. So, we could be seeing a temporary bottom in Intel's business. 

What should investors be watching for tonight? Here are three suggestions:

• Focus less on the current quarter's performance and instead look ahead to what kind of outlook Intel is providing. Yes, the company did horribly whiff on forecasting the current quarter, but it'll be interesting to see how demand for the newest version of Windows plays into their estimates. 
• Margins should remain a key focus for the company. Intel has managed to outgrow PC sales for years by taking gross margins from 51.9% in 2007 to 63.8% in the past twelve months. Watch the data center group in Intel's report tonight. That's a high-margin division that is set to see growth from many of the drivers holding Intel's PC business back. 
• Finally, be on the lookout for any added commentary on Intel's push into the mobile world. Yes, the company has next to zero market share, as Qualcomm (QCOM 0.96%) collects about 48% of smartphone processor revenue. However, Intel's newest mobile chips have seen surprisingly excellent reviews. That not only gives Intel an potential in-road into smartphones in the coming years, but it could also thwart the threat of ARM-based processors like NVIDIA's (NVDA 3.30%) Tegra finding traction on Windows devices. The value proposition of Windows on ARM has long been questioned, but if Intel's offering mobile processors with similar power consumption and powerful performance, it'd go a long way to heading off OEMs from using ARM processors on Windows devices.