Why Intel Will Move the Dow Tomorrow

Earnings season for the Dow Jones Industrials (DJINDICES: ^DJI  ) has started to gear up, with favorable results from the Dow's financial companies making investors more optimistic that this quarter's results will provide a much-needed shot of confidence for the economic recovery. Later today, though, Intel (NASDAQ: INTC  ) will weigh in on the current state of affairs in the technology industry, and the Dow-component chip-maker's results could have a huge impact on prospects not just for its own stock but for Microsoft (NASDAQ: MSFT  ) and tech stocks more broadly.

Intel expects to release its earnings report shortly after the market closes this afternoon at 4 p.m. EDT. It will then have a conference call at 5 p.m. EDT in order to discuss the results.

Investors have been increasingly optimistic about Intel's recent results, bidding the stock up by double-digit percentages in just the past few months. With expectations of earnings growth of a third from year-ago levels, Intel has set the bar high for today's report.

Of course, Intel shareholders have already gotten advance notice of what would have been the most surprising element of the company's growth. Last month, Intel raised its sales guidance for the quarter and full year, citing not Intel's initiatives to break more deeply into the mobile-chip space but rather a big boost in demand for PCs, in which Intel remains the dominant provider of microprocessor chips. Enterprise customers apparently responded to Microsoft's elimination of customer support for older-line operating system software by replacing their hardware at the same time, and that should provide a nice boost for Intel in a business that until now has shown few signs of ending its long-term decline.

Source: Intel.

Yet the trap for investors is putting too much importance on a bounce in PC demand. Intel, Microsoft, and many other tech players will reap huge profits from the PC industry for years to come, but growth prospects there are likely to be fleeting at best. By contrast, Intel's forays into initiatives like the Internet of Things could drive future growth, with initial results already having been promising. Moreover, mobile devices are still a key opportunity for Intel to capitalize on, with new chip offerings allowing Intel to set ambitious targets to boost shipments of mobile-specific processors by the end of the year. Intel is far from the only company banking on the ongoing mobile revolution, but cutthroat competition will make achieving growth targets that much harder for every company in the industry.

Intel will move the Dow, as shareholders draw conclusions from its results about the health of the technology industry overall. If Intel disappoints this afternoon, then the Dow's recent record runs could come to an end at least temporarily.

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