Crow, meet mouth. Mouth, crow.

In a statement issued yesterday, Intel (NASDAQ:INTC) substantially updated its guidance for the first quarter. The chip maker now predicts revenue will come in between $9.2 billion and $9.4 billion, up from earlier forecasts of $8.8 billion to $9.4 billion. That moves the midpoint of guidance from $9.1 billion to $9.3 billion.

Intel also upgraded its expectations for gross margins to 57% from 55%. Though this would still equal a year-over-year decline of 3%, it's much smaller than the 7% year-over-year decline from the fourth quarter. It also suggests some major improvement in how much Intel is paying for each new dollar of sales. Indeed, if we believe Intel can make the midpoint of its guidance and its margins, then it will have cut its cost to acquire new revenue roughly in half from one quarter to the next. That's pretty impressive. (Take a look at the table below to see the details.)

The improvement should also be great news for long-term shareholders. Yet, interestingly, the stock wasn't responding this morning, down by more than 1% when I wrote this. Normally I'd say the ticker tells you nothing, but not in this case. I think it's entirely possible that some large institutions still ascribe too much risk to Intel. They might not be wrong. After all, the company's margins, costs, and profits have bounced around like a rubber ball. And its costs to acquire new sales are still well above recent historical norms.

Part of this is due to the cyclical nature of the chip industry. But part of it is also due to increasingly competent competition from Advanced Micro Devices (NYSE:AMD). And regulators are beginning to breathe down Intel's neck, in Japan and elsewhere. There's a risk that Intel will have to substantially alter the ways in which it does business. How real is the possibility for such a gloomy outcome? Very.

Till then, Intel deserves a polite golf clap for a well-executed short-term turnaround.

Intel's cost of new sales, in thousands of dollars, unless otherwise indicated:

Quarter Sales Year-prior sales Cost of each new dollar of sales
Q1 2005 $9,300 $8,091 $0.64
Q4 2004 $9,598 $8,741 $1.21
Q3 2004 $8,471 $7,833 $0.75
Q2 2004 $8,049 $6,816 $0.00
Q1 2004 $8,091 $6,751 $0.00
Q4 2003 $8,741 $7,160 $0.00
Q3 2003 $7,833 $6,504 $0.00
Q2 2003 $6,816 $6,319 $0.00
Q1 2003 $6,751 $6,781 N/A

Fool contributor Tim Beyers wonders whether the inquiry into Intel's trade practices will put it in the same continuous lawsuit loop that has entrapped longtime partner Microsoft. What's your take? Share your thoughts with other Fools at the Intel discussion board. Tim didn't own shares in any of the companies mentioned in this story at the time of publication. You can find out what's in his portfolio by checking Tim's Fool profile, which is here. The Motley Fool has a disclosure policy.