By Benjamin Pimentel
Intel Corp.'s surprising strong second-quarter results triggered
a tech sector rally on 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 industry bellwether, Google
Inc. (GOOG)
Intel's (INTC) stunningly upbeat report, 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 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 more than 4%
Intel's arch-rival Advanced Micro Devices Inc. (AMD) gained more
than 9%, while Texas Instruments Inc. (TXN) rose 3.5%.
These gains boosted the Nasdaq (RIXF) by more than 2% to 1,848,
while the Morgan Stanley High Tech 35 Index (MSH) added more than
3%.
Major bellwethers gained more than 2%, including Google,
Hewlett-Packard (HPQ), IBM Corp. (IBM), Oracle Corp. (ORCL) and
Microsoft Corp. (MSFT).
Cisco Systems (CSCO) was up more than 4%, 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 170 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.
In fact, Intel's report followed a sobering update from one of
its major customers, Dell Inc. (DELL), which warned that weak
demand in the corporate sector will continue to pressure its
earnings.
In fact, 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 & Company analyst
Curtis Shauger to speculate on what Dell and Intel's reports mean
for another major tech player, software giant Microsoft Corp.
(MSFT)
"There is little doubt that Intel's results indicate the
potential for better than expected PC unit volumes," Shauger wrote.
"Checking this against Dells 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, but at a slower
pace.