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Stock Analyst Update

Intel's Hardly Brimming with Confidence

Near-term PC demand remains just one of many questions.

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Although Intel's (INTC) third-quarter results could have been worse, those looking for a strong vote of confidence in near-term PC demand probably need to look elsewhere. We hadn’t been particularly fond of Intel as an investment leading into the third quarter, and we fail to see a compelling reason to change this opinion even though the stock has shed a great deal of its value in recent weeks.

After the close of trading on Tuesday, Intel reported revenue growth and earnings on the higher end of the firm's lowered expectations. This is reasonably good news for investors who had feared the worst. Revenue growth came in at 5% over the prior quarter, and 19% over the same quarter last year. Clearly European demand was far lower than Intel anticipated due to a weak Euro and high fuel costs. Unit PC processor shipments were also flat in the quarter, as were average selling prices. One positive sign from Intel, however, was gross margins improved on the quarter in a weak demand environment because the company was able hold off some of the costs of newer production facilities. On the whole, Intel's third-quarter earnings were obviously disappointing, but not disastrous.

Jeremy Lopez does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.