Why Didn't Intel Stock Plunge Today?

Intel (NASDAQ: INTC  ) didn't have a great first quarter by any means. GAAP earnings plunged 25% year over year on 2.5% weaker sales, and gross margin is in a long, slow free fall.

INTC Gross Profit Margin Quarterly Chart

INTC Gross Profit Margin Quarterly data by YCharts.

That's still not a disaster in the light of terrible PC-system sales across the industry. Shouldn't Intel have reported some kind of revenue implosion here, rather than a mild 2.5% dip?

Investors certainly didn't panic over this report. Intel shares are flat just before 2 p.m. EDT, while the Dow Jones Industrial Average (DJINDICES: ^DJI  ) has plunged almost 1%. Intel's mild haircut doesn't hold a candle to Bank of America (NYSE: BAC  ) shares' 5.8% drop, driven by the megabank's far more shocking earnings shortfall. Bank of America chopped about six points off the Dow today.

Beating the Dow on a day like this may not win Intel any awards, but it's a small victory nonetheless.

The company saw its PC processors division deliver 6% lower sales compared with the year-ago period. But the data center segment nearly balanced out that hit by increasing its revenue by 7.5%.

That's pretty much what I expected to happen, given that Intel never warned investors of an impending meltdown. Enterprise systems are in high demand, feeding into the twin booms in mobile and cloud computing. Without powerful servers feeding data into your smartphone, the darn thing would be no more than a fancy phone, after all.

As an early barometer for reports to come, Intel's results point to good things for IBM (NYSE: IBM  ) on Thursday. Big Blue doesn't touch the consumer market any longer, but it should benefit from the strong server-side environment. Like Intel, IBM has suffered only moderate share-price losses today.

On the other hand, the 6% dip in PC chips spells trouble for smaller rival Advanced Micro Devices (NYSE: AMD  ) . Investors haven't panicked yet -- AMD shares are down a relatively mild 1.2% -- but maybe they should. Keep in mind that analyst firm IDC reported 14% lower PC sales in the first quarter and consider how much smaller Intel's drop is. The difference must come out of somebody's revenue, and Intel really only competes with AMD in that sector. I'll keep a nervous eye on AMD's report later this week and a far more optimistic one on IBM's.

When it comes to dominating markets, it doesn't get much better than Intel's position in the PC microprocessor arena. However, that market is maturing, and Intel must find new avenues for growth. In this premium research report on Intel, our analyst runs through all of the key topics investors should understand about the chip giant. Click here now to learn more.


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  • Report this Comment On April 17, 2013, at 2:23 PM, SnarfJabroni wrote:

    Anders Anders Anders....the AMD fanboi in you remains till the bitter end.

    You speak of INTC gross margins being in a "long slow free fall", yet your chart does not reinforce your words.

    Even considering your arbitrary BEGINNING of your chart, which represented the ALL TIME HIGHEST QUARTERLY GROSS MARGIN OF ALL TIME for INTC (not intentional I am sure, right?), coupled with your SCALE of your gross margin, the stock still does NOT look to be in a "freefall", slow, long or otherwise.

    INTC still had Q1 margins that all of their "peers" would die for, and with the upcoming die shrinks in late 2013-early 2014, they will have no competitors in this space, and margins will AGAIN improve significantly. Add to that INTC is going to be the first adopter of a 450mm wafer which they have ALREADY demo'd, and your silly claim just doesn't hold water.

    And if I REALLY wanted to tear your flip analysis apart even further: the term "freefall" denotes a rapid and steep decline, so to say a freefall is "long and slow", is ludicrous not to mention incorrect.

    But as I said, I would expect nothing else from the lifelong AMD fanboi....bravo!

  • Report this Comment On April 17, 2013, at 3:31 PM, ghstflame wrote:

    I agree with Snarf's analysis of your chart...that is a prime example of cherry dates.

  • Report this Comment On April 17, 2013, at 5:26 PM, SnarfJabroni wrote:

    Yes ghstflame, COMPLETELY cherry-picked. Here is the same YCHART he used, but with INTC's 10 years worth of Q gross profit margin. You draw a trend line there, and tell me where you see any freefall of gross profit...laughable! http://ycharts.com/chart_creator#series=id%3AINTC%2Ctype%3Ac...

  • Report this Comment On April 18, 2013, at 12:38 PM, jpanspac wrote:

    Very poor analysis, Anders.

  • Report this Comment On April 18, 2013, at 1:33 PM, captal07 wrote:

    Thanks for your comments Snarf, and for pointing out the cherry-picking.

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