Intel Corporation (NASDAQ:INTC) is scheduled to report its financial results for the third quarter of the current fiscal year after the market close today, October 15. Analysts at Citi Research projected that the company’s earnings performance will be in line with the guidance of 5.4% quarter-over-quarter growth.
Citi Research analysts Glen Yeung, C. Adeline Lee, and Samuel Meechan also anticipated that the new products of Intel Corporation (NASDAQ:INTC) contributed benefits to channel fills, and its enterprise clients and server improved during the previous two months.
Investors are concentrated on Intel’s guidance
According to the analysts, investors are concentrated on Intel Corporation (NASDAQ:INTC)’s guidance at 4.1% quarter-over quarter. The consensus estimate represents +530 bps gap compared with 5-year normal seasonal growth of -1.2%. The company has a guidance of +7.0%.
Yeung his fellow analysts speculated that investors probably consider the guidance of Intel Corporation (NASDAQ:INTC) high because of sub-seasonal consumer NB trends based on evidence by notebook ODM data (+5% q/q in3Q13 vs. seasonal +10.2%) and NPD data (-~2.7% in 3Q13 vs. normal seasonal 24.7%).
The guidance for Intel is high
The analysts indicated that they agree with the perception of investors that the guidance of Intel Corporation is high however they speculated that the company incorporate consensus given the momentum of its enterprise business. Intel’s broadened range of guidance is expected at +/-4% on either side of the mid-point.
Yeung and his fellow analysts noted that Intel Corporation (NASDAQ:INTC) is consistent in suggesting that mix is the biggest uncertainty in the third quarter. The introduction of Bay Trail (an out-of-order instruction set) and mix lower ASP Bay Trail is likely. According to them, “Should Bay Trail cannibalize only Pentium (its PC price-point comparable), it would benefit gross margin % and $.”
Intel’s server business need to grow
On the other hand, the analysts projected that if Bay Trail impairs the core sales of Haswell, the impact would be “deleterious.” Yeung and his fellow analysts said Intel Corporation (NASDAQ:INTC)’s server business needs to grow +16.7% q/q to meet the consensus estimate.
The analysts said they will not be surprised to see Intel Corporation (NASDAQ:INTC) report higher than the upper-end of $22 to $25 trading range given its better enterprise demand. However, Yeung and his colleagues said they do not expect the company to achieve higher than the range due to concerns related to the 64-bit ARM and risk to incursion in PCs.
“We continue to expect a 12.8″ ARM-based convertible or tablet from Apple Inc. (NASDAQ:AAPL) in 1H14 aimed at the core PC market. Meanwhile, ARM-64 represents a threat to Intel’s efforts in handsets and server,” according to the analysts.
