Intel Boosts Earnings Prediction on Higher Demand

In a Thursday announcement after the market close, the world's largest semiconductor manufacturer raised revenue estimates from $9.3 billion to $9.5 billion. In October it had made conservative estimates of $8.6 billion to $9.2 billion.

Not Much Difference

"Intel's fourth quarter is shaping up to be better than we originally anticipated, but we are keeping our fair value estimate unchanged at $22 per share," Morningstar's Jeremy Lopez wrote in an analyst's note this morning.

"This doesn't change my view of what's going on in the world," Lopez told TechNewsWorld. "I think in 2005, Intel is going to have a halfway decent year."

Intel originally expected a continuation of soft chip demand, but it has seen a bump up towards average growth in what is traditionally the best quarter for the semiconductor market.

"The midpoint of the estimates would put fourth quarter sequential growth at 11 percent," Lopez said. "This range is at the low end of seasonal norms." The previous estimates put midpoint growth at 5 percent.

Inventory Concerns

Intel CFO Andy Bryant said that the company experienced stronger demand and growth across the board. He added, "Our inventory levels are on track to decline this quarter by several hundred million dollars."

Morningstar's Lopez saw that as a plus, saying that Intel had been paying the price for converting its manufacturing process too efficiently from 200 mm wafers to 300 mm wafers, which produced an inventory glut. Intel will still have to create enough demand to cover its expanded manufacturing capacity, he said.

"Long-term, I still think it's an issue for them," he said. "They're increasing capacity, but can they sell it? That's the biggest challenge."

Despite missteps that have, among other things, allowed competitor AMD (NYSE: AMD) to beat Intel to market with a dual processor chip, the company is healthy, Lopez said.

"Intel is on pace for a second year of double digit sales growth, which is impressive," Lopez said.