Intel ?accumulate?

18.10.07 - AC Research

NEW YORK, October 18 (newratings.com) - Analyst Henning Wagener of AC Research reiterates his "accumulate" rating on Intel Corp (INTC).

Accoridng to AC Research?s research note dated October 17 and published this morning, the company has reported its results for 3Q07. In that period, Intel was able to grow its sales by 15% y/y to $10.1 billion. Earnings from operations were up 64% at $2.25 billion. Net earnings improved $0.56 billion to $1.86 billion, or $0.31 per share.

In all, the reported results were marginally ahead of the estimates, the analyst says. In this context, Intel benefited from the robust demand for chips. Business with respect to the production of microprocessors for notebooks and other protable computers was particularly positive. The company also benefited from cost cutting measures through job cuts. In all, the company?s gross profit margins improved by 3.3 points to 52.4%.

In the course of its cost reduction programme, Intel plans to cut another 2,000 jobs in 4Q. This measure is designed to reduce costs by $2 billion this year and by $1 billion in 2008.

At Tuesday?s closing price of $25.48 and a 2008 P/E ratio of about 18, the company?s stock still seems to enjoy a rather moderate rating. Recently, Intel succeeded in winning market shares from competitor AMD. Following the introduction of the new four core processors at AMD, however, competitive pressure may intensify over the next few months. In all, Intel has a good product portfolio, and should be able to at least defend its excellent market position in the next few quarters. Future development in operations may be threatened by possible negative effects of the US subprime crisis on consumer spending.

AC Research reiterates its "accumulate" rating on Intel.