Intel’s Stronger Outlook Fuels Tech-Sector Cheer

Intel has boosted its sales forecast for Q3, providing an injection of confidence to the tech sector, where it’s viewed as an industry bellwether.

Intel now expects revenue for the third quarter to be US$9 billion, plus or minus $200 million, compared with the previous range of $8.5 billion, plus or minus $400 million. Wall Street had been expecting revenue to clock in at $8.6 billion.

The latest projections are still lower than the $10.2 billion in sales Intel registered in Q3 2008 — but that was just before the economy went into free fall and consumers snapped their pocketbooks shut.

Indeed, Intel is citing growing consumer demand for end-products — namely PCs — that use its microprocessors and chipsets as the reason for its improved forecast.

Intel also revised its gross margin to the upper half of the previous range of 53 percent, plus or minus two percentage points. All other expectations were unchanged.

Intel did not return the E-Commerce Times’ request for comment in time for publication.

Tech Optimism

Intel’s upward revision follows other favorable reports from the tech sector.

“As the world’s largest semiconductor company, Intel is viewed as a bellwether and a barometer for spending in the information technology industry,” said Fred Ruffy, senior trading analyst with WhatsTrading.com.

Apart from the Intel report, “tech stocks are seeing relative strength today after Dell Computer, the second largest PC maker behind HP, posted better than expected earnings,” he told the E-Commerce Times.

Also, “chip stocks are broadly higher, with the PHLX Semiconductor Index gaining 7.00 points to 310.76. The Nasdaq is up 8 and easily outperforming the Dow, which is down 30.

On the Offensive

The enthusiasm over Intel and Dell is justified, said Scott Testa, a professor of business at Cabrini College.

“The economy is getting better, and there is pent-up demand that is just starting to be released,” he told the E-Commerce Times.

Back to school demand is generating a boost, he said, and “when Windows 7 is released, it will help the PC industry a lot as well.”

Indeed, the PC market in general appears poised for a sharp recovery, with executive maneuvers foreshadowing offensives on several fronts.

“Eric Schmidt’s recent resignation from the Apple board suggests that Google is preparing to make significant moves in the hardware arena,” Andrea Belz, principal of Belz Consulting, told the E-Commerce Times. “Furthermore, Apple’s own recent strong performance, although it was not fairly reflected in the stock price, show that they are also moving forward.”

These compares are clearly picking up early signals that the technology market is on the mend, and they are preparing to respond rapidly to changing consumer needs, Belz said.

It should be noted that the technology market did not suffer from the overcapacity that crippled companies when the telecom bubble burst, Belz continued. “Therefore, it won’t take as long to flush the excess inventory through the system.”

What looked to be a down year for PC sales now may end up neutral to slightly higher than originally projected, said James Brehm, senior consultant and director of business development in Frost & Sullivan’s information and communication technology practice.

Netbooks, smartbooks and other connected devices on wireless carrier shelves and in advertisements from the big three — Sprint, Verizon and AT&T — will also help grow mindshare, Brehm added.

“At Dell, Notebook unit shipments to consumers are up 30 percent year over year,” he noted. “It is this consumer demand that is helping to steady the ship as we sail through the choppy waters of an unstable economy. Enterprise and SMB sales — while still down on a year-over-year basis — are turning slightly upward on a quarterly sequential basis. This shows me that business IT managers are looking at the potential economic recovery under way as a signal to begin buying again.”

In short, concluded Brehm, it’s quite possible that 2010 will mark the beginning of the next corporate tech refresh cycle in the PC ecosystem.