By Benjamin Pimentel
Intel Corp.'s surprisingly strong second-quarter results
triggered a tech-sector rally Wednesday, pushing the Nasdaq
Composite Index back above the 1,800 mark.
The rally pointed to rising confidence in a tech rebound, as
investors braced for more earnings releases, including Thursday's
much-anticipated report from another bellwether, Google Inc.
Intel's (INTC) upbeat results, which kicked off the tech
earnings season, prompted one analyst to refer to the Major League
Baseball All-Star game, calling the chip giant's results and
short-term forecast a "grand slam."
"In addition to Pujols and Jeter, Intel also showed up at the
MLB All-Star Game and then hit a grand slam by delivering
significantly higher revenues and gross margins for both
second-quarter results and the third quarter guide, respectively,"
Wedbush analyst Patrick Wang told clients.
Intel late Tuesday posted impressive adjusted earnings, and
issued a better-than-expected third-quarter forecast. The company's
shares soared more than 7%.
The Santa Clara, Calif.-based tech behemoth's results triggered
a buying spree in the chip sector and beyond, pushing the
Philadelphia Semiconductor Index (SOX) up by 4%
Intel's arch-rival Advanced Micro Devices Inc. (AMD) gained more
than 9%, while Texas Instruments Inc. (TXN) rose more than 3%.
These gains in turn boosted the Nasdaq (RIXF) by more than 3% to
1,854. The Morgan Stanley High Tech 35 Index (MSH) also added
4%.
Major bellwethers also advanced, including Google (GOOG),
Hewlett-Packard Co. (HPQ), IBM Corp. (IBM), Oracle Corp. (ORCL) and
Microsoft Corp.
Cisco Systems (CSCO) was up more than 5%, while Juniper Networks
(JNPR) gained more than 6%.
The tech gains helped lift the broader market as the Dow Jones
Industrial Average (DJI) gained more than 200 points.
Still, some analysts counseled caution, casting doubt on
speculation that Intel's robust performance signaled a comeback for
the industry.
Many chipmakers have seen sequential gains in sales recently due
mainly to what analysts say was an inventory correction following
the economic downturn as manufacturers scaled back chip supplies to
levels below real demand.
"Although the Intel quarter was clearly spectacular on all
fronts, we continue to believe the upside was driven by inventory
replenishment as we have not seen any evidence of increasing PC
demand," J.P. Morgan analyst Christopher Danely said in a research
note.
Indeed, Intel's report followed a sobering update from Dell Inc.
(DELL), one of its major customers. Dell which warned that weak
demand in the corporate sector will continue to pressure its
earnings.
Moreover, Intel Chief Executive Paul Otellini also told analysts
that, while consumer demand helped the company's sales, "enterprise
PC volumes remain weak," although server processor volumes were
better than expected."
Dell also said it expects a slight increase in revenue, but
lower gross margins. That prompted Caris & Co. analyst Curtis
Shauger to speculate on what Dell and Intel's reports mean for
another major tech player -- namely, software giant Microsoft
(MSFT).
"There is little doubt that Intel's results indicate the
potential for better than expected PC unit volumes," Shauger wrote.
"Checking this against Dell's guidance of 'slight increase' in
revenue it would seem that a decent portion for the differential is
inventory replenishment, which does not benefit Microsoft."
Meanwhile, analysts await Google's report, which is widely
expected to show the Internet giant posting growth, albeit at a
slower pace.