The world's largest manufacturer of semiconductor products,
) raised its guidance for the second quarter of 2014. Also, the
company increased its full-year revenue and gross margin
expectations. Following the news, the shares rose 5.6% in
The chip maker expects second-quarter net sales to be $13.7
billion (+/- $300 million), up from $13.0 billion (+/- $300
million). The company also increased gross margin guidance by 1
percentage point (pp) to 64% (+/- 2 pp); total operating expenses
were increased to $4.89 billion, up $100 million from earlier
expectations, and the annual tax rate is expected to be 27%, down
from 28% expected earlier.
Additionally, management now expects full-year revenues to
improve versus the prior expectations of its being in line with the
2013 level. Gross margin is now expected in the upper half of the
previous range of 61% (+/- a few percentage points) and operating
expenses to increase to $19.2 billion (+/- $200 million) versus the
earlier expectations of $18.9 billion (+/- $200 million).
Management stated that the guidance increase was on account of
stronger-than-expected demand for PCs used by businesses. Intel
stated that it is witnessing improved demand in the PC business
segment, which has been generally weak for some time now. The
company's revenues from its PC business fell during the first
quarter, but the decline from the year-ago quarter was
significantly lower than the last year.
PC shipments, though a recurring concern so far, are showing
signs of improvement. As per the latest report by research firm
IDC, 2014 PC shipments are expected to contract 6.0%, marginally,
lower than the research firm's earlier forecast of a decline of
6.1% predicted in March this year. The improved estimate is largely
due to stabilization in Western Europe and higher-than-expected
sales in other mature markets.
The research firm also stated that demand for tablets will
continue to slow down this year, stabilizing the PC market. The
system refreshes and enterprise system migrations beyond
) XP operating system are the primarily factors driving desktop PC
Intel remains the leading producer of microprocessors for the PC
market. The company is well positioned to gain from this PC
stabilization, whether customers opt for the all-new Windows 8 or
) chromebook. Management stated that Intel was the leader on the
Intel shares carry a Zacks Rank #3 (Hold). Another stock that
looks attractive is
) with a Zacks Rank #2 (Buy).
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