Three months ago, I gave Intel (NASDAQ:INTC) a six-month timetable to pull itself out of a tailspin. The chip giant responded immediately with early signs of recovery and followed up last night with results so good that they surprised even CEO Paul Otellini.
I think we can stop calling a bottom to the PC market now; it is already behind us.
The skinny
Intel presented us with a cool $8 billion in second-quarter revenue and $0.18 of net non-GAAP income per share. This bottom line figure excludes the damage from a $1.45 billion fine paid to the European Commission's antitrust enforcers.
Last quarter, Otellini expected "that the industry is returning to normal seasonal patterns." But a 12% sequential sales uptick does more than return to old seasonality -- it blows each of the last five years out of the water. Intel tends to lose a modest amount of sales in the second fiscal quarter when compared to the first. Not this time!
What it means
These are refreshing numbers, but I still think that the majority of Intel's rebound is yet to come. Every metric that looks so uppity in a sequential light is still far worse than the year-ago equivalent. It's not too late to profit from Intel's rebirth. Otellini sees the current, unexpectedly strong levels of consumer spending to continue, which should be great news for generally retail-oriented gadget designers like Apple (NASDAQ:AAPL) and Dell (NASDAQ:DELL).
The enterprise market should follow suit more slowly. There's a lot of pent-up demand for new systems in the corporate world, but many IT directors are waiting for Microsoft's (NASDAQ:MSFT) Windows 7 to be released and properly tested before placing any drastic orders. That's a slow-release boon for Dell and Intel again, as well as Hewlett-Packard (NYSE:HPQ) and server specialist Sun Microsystems (NASDAQ:JAVA).
The aftermath
Mr. Market gave Intel a hefty 7% boost overnight, a clear indication of how much investors appreciated this little surprise. But they don't seem to think that it's Intel's victory alone -- grand rival Advanced Micro Devices (NYSE:AMD) rode the coattails of this news to a 6.5% after-hours jump.
So investors are expecting a broad-market recovery here, not an Intel-specific one. Would you agree, or did Intel just outplay and outlast everyone this quarter? The comments box below is ready to hear your thoughts.
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