Intel up on earnings expectations

Shares of Intel Corp jumped 4 per cent to their highest in more than a year on expectations that robust Asian sales and a rebound in corporate spending will help the chipmaker beat current-quarter earnings estimates.

The rally propelled gains in other semiconductor stocks, with Advanced Micro Devices Inc and Nvidia Corp both rising more than 3 per cent.

In January, Intel forecast revenue and margins for the first quarter above Wall Street expectations, as demand for personal computers from corporations bounced back after years of stretched budgets and belt-tightening.

Now, analysts say there is talk in the market the company could pre-announce strong results soon.

"There's speculation that Intel will have a positive pre-(announcement)," Auriga analyst Daniel Berenbaum said.

Intel spokesman Chuck Mulloy declined to comment and said the company was in a quiet period ahead of its first-quarter earnings announcement on April 13.

Analysts also cite the Chinese New Year in February - a season of high spending in China - as a reason for robust sales, especially in computers, in the world's No. 3 economy.

The Asia-Pacific region, excluding Japan, accounts for roughly three-fifths of Intel's revenue. Wedbush Morgan analyst Patrick Wang said there had been concerns about inventory build up and poor sales leading up to the Chinese holiday.

But sales remained strong, pushed in part by Chinese government programs to spur consumption of everything from cars to household appliances.

Beijing is encouraging scores of technology upgrading projects across the country as part of an effort to spur spending on electronics, among other initiatives.

Analysts on average are expecting Intel to report a current-quarter profit of 37 cents per share on sales of US$9.79 billion, according to Thomson Reuters I/B/E/S.

Some worried that margins may have peaked in the current cycle, but analysts say strengthening demand may help propel the company's earnings power further.

Broadpoint AmTech analyst Doug Freedman said Intel may pre-announce earnings if management receives an update that is outside the company's range by a certain degree.

Additionally, Freedman said, if the company's revenues and margins are better than expected, those two factors could push the bottom line of estimates up by as much as 10 per cent.

"I won't be surprised by a positive pre-announcement, but I don't know what guideline they would use to do that," he said.

Intel's share rally was accompanied by unusually high volume in the options market.

Options traders exchanged about 244,000 contracts in Intel - three times the normal level, according to option analytics firm Trade Alert.

The volume was led by the trading of 204,000 call contracts, as many traders rolled their bullish positions from soon-to-expire March options to the April options.

March options expire on Friday after the close.

Intel shares have steadily risen this year, by nearly 4 per cent as of Monday. Tuesday's rally sent the stock to the highest level since September 2008, when markets began spiraling downward during the financial crisis.

"Our contacts roundly hailed the PC sector as likely to be robust for the remainder of the year," FBR Capital Markets analyst Craig Berger said in a recent note to investors.

Many industry executives and analysts say there were signals early in the year of a strong return of spending by companies to upgrade equipment and software, though some expect growth to sharpen only in the latter half of 2010.

Robert aird analyst Tristan Gerra said he was seeing strong sales of corporate notebooks. That, along with strong forecasts from top-tier manufacturers and strong sales of Intel chips released in January were pushing shares higher even though gross margins may have peaked.

Intel launched new, more powerful server chips on Tuesday .

"Intel has the strongest product portfolio in years," Gerra said.

The Philadelphia Semiconductor Index rose nearly 3 per cent to 359.87. AMD stock shot up 5.38 per cent to US$9.40 ($13.20) on the New York Stock Exchange. Nvidia rose 3.5 per cent to US$17.76, Micron Technology Inc rose nearly 5 per cent to US$10.21, and Intel rose almost 4 per cent to US$22.01 on Nasdaq.

- Reuters