Intel (INTC): Atlas Holds The World Aloft

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After rafts of bad news from every corner of the business arena starting with GE (NYSE: GE) and spreading to Washington Mutual (NYSE: WM) and Wachovia (NYSE: WB), a hard luck report from Intel (NASDAQ: INTC) could clearly have dropped the market another 400 points, pushing it below 12,000.

If an earnings report could be light and cheery, Intel’s was. Although most of its first quarter figures were worse than Q4 07 numbers, they improved, in many cases over the same period last year. Revenue rose 9% to $9.7 billion and operating income was up 23% to $2.1 billion, a sign that the company is running with some real efficiency.

The digits most analysts turn to first is gross margins. For the quarter, that figure was 54%. Women and small children erupted in applause when Intel forecast that the key measure would improve in both Q2 and for the year. The company’s predictions were better than most had hoped.

The most intriguing thing about the Intel numbers is that the company did well in the Americas. with revenue up 17%. Perhaps the region which is home to the US is not economically dead after all.

Intel’s numbers will cascade into forecasts for other companies. AMD (NYSE: AMD), Intel’s smaller rival, may do well. PC and server companies including Hewlett-Packard (NYSE: HPQ) and Dell (NASDAQ: DELL) may get some relief. Wall St. will assume that the increase in chip sales should be good for Microsoft’s (NASDAQ: MSFT) Windows sales.

If it were that easy. investors could walk away from much of the current economic and earnings news with a sublime confidence that the financial world is getting better.

Intel’s customer base is so broad and so deep that, while some of them must be doing well, others may not be. It is just as likely that Intel’s sales hurt AMD and that, while HPQ may be doing well it is at the expense of Dell.

Intel’s earnings are no a sucker trap, but they are not unadulterated good news. The tech market is a patchwork of companies and Intel shoulders are only so broad.

Some of the tech companies are still in the shadows and may be for some time to come.

Douglas A. McIntyre