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Intel inches above Wall Street's earnings expectations

Stock drops anyway

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On the day that the Dow notched its first triple-digit gain in over a month, Intel joined the party – well, in a minor way, to be sure – by beating Wall Street's lowered expectations for its most-recent quarter.

The company reported quarterly revenue of $13.5bn, net income of $3bn, and earnings per share of 58¢. While those revenue numbers are down from last-quarter's $14.23bn, they're higher than what the Street had predicted, and at the top end of Intel's revised third-quarter guidance.

When Intel announced the financial results for its second quarter this July, it had hoped for better. At that time, the company confidently predicted that revenues for its third quarter – the one announced this Tuesday – would be $14.3bn, plus or minus $500m.

In September, however, Intel shaved that estimate down to somewhere between $12.9bn and $13.5bn, citing reduced inventory, softness in enterprise PC sales, and "slowing emerging market demand."

Still, Intel's third-quarter numbers came in above those predicted by the moneymen. Wall Street Cheat Sheet, for example, reported that analysts foresaw an EPS of 50¢, down from the 65¢ that they had estimated three months ago.

That 50¢ estimate was a decline of 23.1 per cent from Intel's year-ago quarter EPS of 65¢. The Cheat-Sheeters also reported that analysts predicted $13.2bn in revenue, down 7.2 per cent from the year-ago quarter.

Yahoo! Finance's predictions were in the same ballpark, but with a bit more detail: the same EPS prediction of 50¢ and revenue pegged at $13.23bn, which would have been a 7.1 per cent drop from the year-ago quarter's $14.23bn. That $13.23bn estimate, by the way, nestled between a high estimate of $14.39bn and a low of $12.98bn.

In a statement, Intel President and CEO Paul Otellini played his company's numbers cautiously. "Our third-quarter results reflected a continuing tough economic environment," he said.

His caution was warranted: immediately following the release of the results, Intel's stock took a 2 per cent dive. Apparently the moneymen had hoped for a miracle, and not just having their expectations exceeded. Remember, in the stock market, the old baseball saying of "You're only as good as your last at-bat" is turned on its head; "You're only as good as your next at-bat" is Wall Street's mantra.

Perhaps with that truism in mind, Otellini put a bit of a shine on the future. "The world of computing is in the midst of a period of breakthrough innovation and creativity," he said. "As we look to the fourth quarter, we're pleased with the continued progress in Ultrabooks and phones and excited about the range of Intel-based tablets coming to market."

Despite that guarded optimism – and a wee bit of an exaggeration about "continued progress in Ultrabooks" – Intel issued tempered expectations for its fourth quarter, saying that it expects only a modest increase in revenues from this quarter's $13.5bn: up to $13.6bn, plus or minus $500m. ®

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