Foolish Forecast: Interest in Intel

Tonight is the night for a fourth-quarter 2007 report from chip giant Intel (Nasdaq: INTC  ) . Have a look back at last quarter's results, along with the raw numbers. Then come back here for a second helping of whatever Intel is serving up.

What Fools say:
Here's how Intel's CAPS scoring rates against some of its peers and competitors:

Market Cap (millions)

Trailing P/E Ratio

CAPS Rating

Intel

$128,576

20.7

****

NVIDIA (NASDAQ:NVDA)

$16,030

25.2

*****

Broadcom (NASDAQ:BRCM)

$12,970

83.0

***

Advanced Micro Devices (NYSE:AMD)

$3,550

N/A

**

Atheros Communications (NASDAQ:ATHR)

$1,570

63.7

*****

Data taken from Motley Fool CAPS on 01/14/2008.

CAPS players love Intel and many other tech stocks. One player says, "If you thought the 1990s were great for technology, you haven't seen anything yet. The rest of the world is becoming wealthy, and computers are the appliance to own." So why not invest in the chips that will power those favorite appliances?

The bears are few and far between, and they talk mostly about falling markets -- computer hardware, and stocks in general -- that will take this company along for a depressing ride.

What management says:
Intel added a new seat on its board last November that includes Ms. Carol Bartz, executive chairwoman and ex-CEO of digital design specialist Autodesk. She also serves on the board of Cisco Systems (Nasdaq: CSCO  ) , which makes her the most direct industry link between the two giants. Intel chairman Craig Barrett said he was looking forward to "benefiting from her contributions."

Intriguing.

What management does:
The long-running price war with AMD appears to be over, or at least standing down in a ceasefire. I'd expect the gross margins to climb again, marking last summer as the definitive bottom of this trough.

Of course, the cost savings kicked in a bit before that, and with the 45-nm production lines in working order, there's little need for massive capital expenditures these days.

Margins

7/1/2006

9/30/2006

12/30/2006

3/31/2007

6/30/2007

9/29/2007

Gross

57.9%

54.9%

51.5%

50.2%

49%

49.8%

Operating

25.2%

21.1%

17.5%

17.7%

18.3%

20.1%

Net

18%

16.7%

14.3%

15.1%

15.9%

16.6%

FCF/Revenue

15%

11.4%

13.7%

13.3%

16.8%

19.4%

Y-O-Y Growth

7/1/2006

9/30/2006

12/30/2006

3/31/2007

6/30/2007

9/29/2007

Revenue

1%

(6.1%)

(8.9%)

(7.9%)

(3.1%)

4%

Earnings

(18.9%)

(28.1%)

(41.8%)

(32.1%)

(14.6%)

3.5%

All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ended in the named months.

One Fool says:
You might have noticed that Intel's share price is down some 15% over the last month, even after Monday's brave 5% ascent. That owes to a mixture of recession fears and a couple of negative analyst notes. Dropping out of the One Laptop Per Child program also didn't help the company's image much, though it may have bolstered profit margins a tiny bit.

If IBM's (NYSE: IBM  ) preliminary results are any indication, most of these fears appear to be blown way out of proportion, and a global supplier of tech infrastructure such as Intel should be enjoying salad days right now. The proof, as always, is in the pudding this evening. But I expect it to be a rich, creamy dessert to round off a not-so-tasty 2007.


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