Foolish Forecast: Give Intel Its Due

"I'm about to give you all of my money
And all I'm askin' in return, honey
Is to give me my profits
When you get home"
-- Aretha Franklin, "Respect"

Semiconductor giant Intel (Nasdaq: INTC) is set to report first-quarter earnings Tuesday night. Have a look back at last quarter's numbers and the unsolved mystery of its earnings, and then come back here for an up-to-date glimpse of the company's prospects.

What Fools say:
Here's how Intel's CAPS rating stacks up against some of its peers and competitors:

	Market Cap (Millions)	Trailing P/E Ratio	CAPS Rating (Out of 5)
Intel	$120,080	17.8	****
Texas Instruments (NYSE: TXN)	$38,360	15.8	****
NVIDIA (Nasdaq: NVDA)	$9,970	13.7	****
Broadcom (Nasdaq: BRCM)	$10,930	55.2	***
Advanced Micro Devices (NYSE: AMD)	$3,630	N/A	**

Data taken from Motley Fool CAPS on 4/14/08.

Bullish CAPS players like to point out that AMD has fumbled many of its advantages and opportunities, to the point of making Intel a near-monopoly monster today in the PC processor space. Others like the company's global footprint and the fact that its product lines extend into mobile communications and flash memory.

The bears say that a slowing economy will bring Intel down with it, especially since it operates in the highly volatile tech sector, where investors flee to safer ground at the first sign of a recession.

What management does:
These tables give us a nice overview of the 2006-2007 price war between Intel and AMD, including the strengthening trends since the tacit late-summer truce. The nearly unbroken upward curve of the free cash flow margins is especially encouraging.

Margins	9/06	12/06	3/07	6/07	9/07	12/07
Gross	54.9%	51.5%	50.2%	49%	49.8%	51.9%
Operating	21.1%	17.5%	17.7%	18.3%	20.1%	22.8%
Net	16.7%	14.3%	15.1%	15.9%	16.6%	18.2%
FCF/Revenue	11.4%	13.5%	13.3%	16.8%	19.4%	19.9%

Y-O-Y Growth	9/06	12/06	3/07	6/07	9/07	12/07
Revenue	(6.1%)	(8.9%)	(7.9%)	(3.1%)	4%	8.3%
Earnings	(28.1%)	(41.8%)	(32.1%)	(14.6%)	3.5%	38.3%

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:
Intel is on top of its game, with efficiency-sharpening job cuts behind it and a comfortable lead over AMD in most aspects of the PC performance picture. The computer memory sector isn't a pretty place to be these days -- but Intel spun out most of its flash memory operations into Numonyx, a privately held joint venture with STMicroelectronics (NYSE: STM). Sales are growing again, cash is flowing to and fro, and Intel investors should be happy.

But they're not. For some reason, Mr. Market thinks that an Intel humming on nearly every cylinder is worth about as much as the one that got trounced by AMD two years ago. Is the entire semiconductor market so much worse these days that all of Intel's improvements should count for nothing? Of course not. Even an AMD shareholder like me has to admit that Intel looks incredibly cheap right now.

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