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Lessons From Intel's Ominous Miss


Intel's earnings did little to calm investors' fears that sluggish economic activity will start to seep into corporate earnings reports.

Despite a strong showing in comparison to last year, Intel's (INTC) earnings did little to calm investors' fears that sluggish economic activity will start to seep into corporate earnings reports:

  • 4Q earnings grew 51% from 2006 to 38 cents per share on $2.27 billion in net income, but came in two pennies below expectations of 40 cents per share.
  • Revenue fell just short of expectations at $10.71 billion compared to the $10.84 The Street was looking for.
  • Gross profit margin was 58%, higher than the firm's prediction of 57% but lower than the historic peaks of 60%
  • 1Q guidance range for sales of $9.4 billion to $10.0 billion was below analysts expectations of $10.1 billion.

On the surface the Intel numbers don't appear too bad – a slight miss on earnings and a conservative forecast in the view of strong economic headwinds. Wall Street disagreed. Intel shares were punished last night and remain under pressure morning trading, as many view the tech bellwether as a proxy for global technology demand.

Intel did not help its cause, as our friends at BTIG point out:

"It was only 8 days ago that CEO Otellini made the following statement on CNBC 'There seems to be no sign of a global r-word out there. You look at China, you look at India, you look at Brazil, you look at Russia, Eastern Europe, they're all growing very, very rapidly. That's where much of the growth in the computer industry has been for some time, and it's now representing a big portion of the growth for consumer electronics.' Please don't convey the rosy scenario unless you can deliver it.

Toddo often opines "the reaction to the news is more important than the news itself" and the harsh reaction to a firm providing a conservative forecast should be troubling to investors, as many bullish pundits claim the economic slowdown is already priced into the market.

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