Intel points the way for a computer led recovery

Stan Beer
Wednesday, 15 July 2009 04:23

Opinion and Analysis

In an earnings season when stocks go up if a company posts results that are not as bad as expected, giant chipmaker Intel has joined its financial and healthcare brethren Goldman Sachs and Johnson & Johnson in beating market estimates for Q2. As a result, Intel's stock has soared and could point the way to a market recovery.

For Intel, the past quarter's performance in which the company posted a US$1 billion profit on revenues of just over US$8 billion was a ray of sunshine through some pretty dark clouds after it was forced to take a US$1.45 billion antitrust hit thanks to the European Commission and AMD.

The earnings, although about US$600 million down on the corresponding 2008 quarter, were based on sales that were significantly better than what the market had predicted.

The Intel result is indicative of the company's and wider IT industry's status in both the US and global economy as a market bellwether.

Intel seems to be demonstrating the principal that the computers industry is one of the first beneficiaries of a market turnaround, just as it is one of the first casualties of a downturn.

If Intel can meet or beat its own bullish Q3 sales estimates, which once again are way above analysts' expectations, the die will have been cast for an economic recovery.

Tempering all this of course is the continuing poor market performances of PCs giant Dell. However, it's debatable as to whether this is as much a factor of the company's declining market share as well as a shift away from desktop computers toward smaller form factor PCs.