The stock market was under some pressure Tuesday morning, with the Dow Jones Industrial Average (^DJI 0.13%) down 0.22% at 10:15 a.m. EST. An outbreak of a deadly virus in China could be playing a role in the market turbulence.

Shares of chip giant Intel (INTC -2.36%) swam against the current, rising strongly on an analyst upgrade and reports of possible price cuts later this year. Meanwhile, the stock of IBM (IBM -2.04%) was down modestly as the company prepares to report its fourth-quarter results after the market close.

Intel plans price cuts, gets upgraded

Intel was up 1.9% Tuesday morning, apparently due to some optimism from analysts at Jefferies, which boosted its rating on Intel from underperform to hold, citing the possibility of a dramatic restructuring that could boost earnings and the stock price.

Some restructuring ideas from Jefferies include the divestiture of Intel's memory business, slashing operating costs, and transitioning to a fabless model by selling its manufacturing assets. That last idea seems far-fetched, but Intel has had a lot of trouble getting its 10nm manufacturing process ready for prime time.

An Intel chip.

Image source: Intel.

10nm delays have put pressure on the company's ability to produce enough chips to meet demand, even as rival Advanced Micro Devices continually steals share from the market leader. Intel will fight back against AMD in the second half of this year, reportedly planning price cuts for its PC processors. Presumably, this plan means that Intel expects the supply situation to improve as the year goes on.

Intel has already done some price cutting to beat back the AMD threat. It slashed prices on new versions of its high-end X series PC chips late last year, and it cut the price on high-memory server chips earlier this month. AMD's Ryzen PC chips and EPYC server chips have been aggressively priced to steal market share, so Intel has little choice but to bring down its own prices.

What impact all this price cutting will have on Intel's bottom line remains to be seen. This is the most competitive the CPU market has been in years, since the last time AMD was producing quality products. Price cuts may help Intel maintain its dominant market share, but investors may not like the downsides.

IBM is set to report earnings

Tech giant IBM will report its fourth-quarter results after the market closes today. The stock was down 0.3% in the morning.

Analysts don't anticipate impressive numbers. Revenue is expected to decline by 0.6% year over year to $21.64 billion, while adjusted earnings per share are seen slumping 3.9% to $4.68. For the third quarter, IBM missed revenue estimates but managed a beat on the bottom line.

The company completed its $34 billion acquisition of Red Hat last July, so the fourth quarter will include a contribution from that open-source software company. But accounting rules related to deferred revenue will prevent IBM from recognizing all of Red Hat's revenue. Meanwhile, it does need to recognize all of Red Hat's costs. So IBM's earnings will be under pressure in the fourth quarter from Red Hat, and that pressure will persist into 2020.

One thing that could help IBM beat estimates in the fourth quarter is its mainframe business. The company began shipping its z15 mainframe at the very end of the third quarter, so the systems segment should see a meaningful sales boost in the fourth quarter. That may not be enough to push overall revenue higher, but it will help IBM return to growth in 2020.

The stock has been depressed for years as revenue and earnings contracted amid a prolonged transformation effort. Another disappointing report could send it lower, although there's the potential for a powerful rally if IBM can tell a good story about 2020 and beyond.