Intel (NASDAQ:INTC) releases its third-quarter 2006 earnings results on Tuesday. So why are we writing about it on the Friday before it reports? Let's just say the results won't be pretty -- you might want to take a few days, and a few deep breaths, to prepare yourself.

What analysts say:

  • Buy, sell, or waffle? A whopping 39 analysts follow Intel, and 22 of these learned souls say you should buy. There are also 16 holds, and one sell.
  • Revenues. On average, the analysts will be looking for a 13.5% decline in sales to $8.6 billion ...
  • Earnings. ... but a 23% decline in profits to $0.17 per share.

What management says:
 Intel's troubles are too well known, and too well documented, for it to be worthwhile for me to rehash them all here. Suffice it to say that rival AMD (NYSE:AMD) has been eating its lunch, and now the story is whether Intel can prove to be the comeback kid. It has been making several moves in this direction in recent months. Let's look at the most recent one.

Early last month, management announced a "significant reduction" in its workforce, combined with a restructuring of operations, through which steps the firm aims to reduce its costs by $2 billion next year and $3 billion in 2008. Note the years, however -- we're unlikely to see cost savings from this latest plan in next week's results. On the contrary, I'd be more on the lookout for "one-time" charges for restructuring, as well as severance payments to those of the 10,500 persons who are about to lose their jobs other than through "attrition." Speaking of which, management says its layoffs will not be complete until mid-2007 -- so whether it calls these costs "one-time" or not in Tuesday's press release, believe me: They're anything but. We've got several quarters of special charges ahead of us, folks.

As for the amount, Intel guesstimated $200 million in total costs for severance, but did not say how it would be taking in restructuring charges. My guess: a bit more than it absolutely needs to, so as to rinse off next year's results in a "big bath."

What management does:

Margins %

4/05

7/05

10/05

12/05

4/05

7/06

Gross

57.9

57.2

58.7

59.7

59.0

58.4

Op.

30.3

30.1

31.4

31.5

29.5

27.1

Net

22.4

22.4

21.8

22.3

20.5

18.0
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:
 Motley Fool Inside Value lead analyst Philip Durell, who recommended Intel to our subscribers back in April, recently covered the company in his annual update of every (yes, every single one) Inside Value recommendation. Citing the firm's new processors and reports that they outclass AMD's comparable offerings, as well as the imminent (but never quite here, is it?) release of Microsoft's (NASDAQ:MSFT) Vista, which should spur consumer purchases of computers containing Intel's new chips, Philip sees a bright future in 2007 and 2008. The announced cost cuts should make that future shine even brighter, and if I'm right in my guess about next week's big bath, well, that could positively set 2007-2008 to glowing.

Shorter-term, though, Philip warns us to expect volatile share prices as inventories of Intel's new chips grow, and discounting of older chips makes the company's margins shrink.

Competitors:

  • NVIDIA (NASDAQ:NVDA)
  • Qualcomm (NASDAQ:QCOM)
  • Sun Microsystems (NASDAQ:SUNW)
  • Texas Instruments (NYSE:TXN)

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Intel and Microsoft are Inside Value selections. NVIDIA is a Stock Advisor pick.Try out these or any of our other Foolish newsletters for yourself,free for 30 days.

Fool contributor Rich Smith owns shares of Intel. The Fool has a disclosure policy.