Wednesday, July 15, 2009

INTC Ramps Up Inventory - Futures Gap Up

Intel blew past expectations last night igniting some futures buying well into this morning.

Lets give INTC its due, when you beat top line results by 10%, you should pat yourself on the back. Investors are still in a buying mood extending from yesterday, so we shall see some gains especially in tech land.

But don't be confused with Intel's better results actually forecasting a better economy or even better PC sales going forward. Its results should spark technology shares today, but I caution that it should not be used as a proxy for the broader market. Intel's performance, while encouraging, reflects the fact the company dramatically scaled back inventory during the correction and is now slowly ramping up its inventory for the seasonal pick up in business. It also benefited from strong but temporary demand from Chinese consumers (China Stimulus) as opposed to a broad pick-up in the tech economy.

Intel also raised 3rd quarter revenue projections as they continue to replenish inventory in their supply chain. The 4th quarter should be interesting to see if all that inventory build up gets funneled through to the end market PC channel.

The quarter has much to to do with the company dampening its own expectations earlier in the year as well as obscene inventory build up last year.

Remember INTC revenues actually dropped from $9.5 Billion year over year, so the semiconductor cycle is not back on line yet.

1 comment:

  1. Intel is always positive coming out of an inventory glut, this is not new news. Historically when they start to push more chips into the channel, its a sign that their demand is strong regardless of PC demand.