Intel's Stock Price Boots Up on PCs -- Ahead of the Tape

By Dan Gallagher 

When Intel Corp. benefits from a good personal-computer business, it is important to remember that it is all relative.

About 68 million PCs were sold globally during the third quarter, according to IDC. Sales are down 3.9% year over year, but also happened to be about 3 percentage points better than what the firm had forecast.

The result for Intel is a decent third quarter, due to be reported Tuesday afternoon. The chip maker already raised its revenue forecast for the period, crediting most of the move to PC inventories getting restocked. Intel now expects revenue to come in at $15.6 billion, plus or minus $500 million -- a gain of about 8% year over year. Analysts expect per-share earnings of 72 cents, up 13% from the same period last year.

Those are solid growth numbers, especially relative to other maturing tech giants. But the PC business that still drives more than half of Intel's revenue continues to decline. The company has deftly navigated this by focusing on segments such as premium, ultrathin laptops that command better margins. Even so, Intel's main hopes for future growth lie in the cloud and the chips that drive it.

That makes Intel's data center business paramount. Analysts expect this segment to deliver $4.6 billion in revenue for the third quarter, up 11% year over year. But sales are unpredictable as a few large-scale cloud companies like Amazon and Google drive a growing portion of the spending on Intel's chips. As such, Intel's data center revenue has fallen short of analysts' forecasts for the last seven consecutive quarters, according to FactSet.

That presents some risk for the shares heading into Tuesday's report. Intel is now up 19% over the past six months -- nearly four times the return of the Nasdaq Composite. It is worth noting that some of those gains can be credited to the company finally winning some business in the iPhone from rival Qualcomm.

Over the longer term, though, Intel has deftly diversified its business. That resilience, along with a healthy dividend and reasonable valuation of 13.4 times forward earnings, still computes for investors.

(END) Dow Jones Newswires

October 17, 2016 14:27 ET (18:27 GMT)

Copyright (c) 2016 Dow Jones & Company, Inc.