Forecast came true

Intel will announce its earnings next week. The company will move 3%+ after announcement.
15 april 2016

Intel has $150B+in market cap and $55B+ in revenue. For such huge companies providing double digit or even high single digit growth is something extraordinary. That's why I don't expect a lot from Intel this quarter. Their outlook for Q1 is the following:

Check that they expect the gross margin decline from 62.7% in 2015 and 64% in Q4 2015. That doesn't sound optimistic, but I would like to remind you that Intel acquired Altera in December and I suppose it can be explained by the integration of two completely different businesses. Altera's gross margin in 2015 was around 66%, something very close to Intel's number. Basically this acquisition could be beneficial for both companies.

Altera is one of the leaders on the market of FPGA producers, and I think that from the business point of view this is a "win-win" for both companies. As soon as Intel wants to increase its revenues in data centers segment and its growth was limited because of absence of own FPGA production, this acquisition can improve the data centers business. 

Intel is a leader in CPUs market. CPU is the actual processor and it is designed to perform a number of operations but the way these operations are performed may not be best for all applications.

So the results of this quarter will show how good this acquisition was and if Altera's business is successfully integrated into Intel's. In Q4 2015 Intel's operating income margin was 35.5%, Altera's - 27%, so I suppose that we can see a decline in operating income throughout the year. But in long-term I suppose Intel's management can maximize the profits from this merged businesses. 

Summary

I will take a look at their financials and operating metrics, the company is on top of my watch list and I expect that this and next quarters will say a lot about the potential long-term investment. 

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Intel will announce its earnings next week. The company will move 3%+ after announcement.

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Forecast came true

INTC moved 3% after the earnings announcement. I was waiting for an uptrend here, but the stock dropped. Will check their financials when available. Stay tuned.