Intel - Second Quarter Results Confirm Industry Slump

| About: Intel Corporation (INTC)

Intel (INTC) the manufacturer of microprocessors announced its second quarter results on Tuesday after the close. The company lowered its full year outlook after other technology companies including Applied Materials (AMAT) and Advanced Micro Devices (AMD) already warned for a tough economic environment. Shares of Intel fell roughly 1% in after-hours trading.

Second Quarter Results

Intel reported second quarter net income of $2.8 billion which was down from $3.0 billion in the second quarter of 2011. Earnings per share remained unchanged at $0.54 per share as the company has gradually repurchased its own shares. The analysts consensus was for second quarter earnings per share of $0.55. Intel used its cash balances to repurchase approximately $1.1 billion in its own shares. Revenues rose 3% compared to last year to $13.5 billion. CEO Otellini commented on the results: "The second quarter was highlighted by solid execution with continued strength in the data center and multiple product introduction in Ultabrooks and smartphones."

Outlook

For the third quarter of 2012 Intel expects to generate $14.3 billion in revenues, plus or minus $500 million. The company expects to generate gross margins of between 63% and 64%. For the full year of 2012 Intel expects revenue growth between 3% and 5%, while it earlier guided for a high single-digit percentage growth in revenues. The company expects to invest about $18.2 billion in research & development and merger & acquisitions for the full year of 2012.

Investment Thesis

Intel ended the second quarter with approximately $13.5 billion in cash, equivalents and short term investments, while operating with roughly $7 billion in long term debt, for a net cash position or $6-$7 billion. Currently, the company has $7.5 billion of repurchases under authorization for the coming quarters.

Shares of Intel fell approximately 1% in after-hours trading around $25 per share, marking year to date gains of 4%. Shares peaked at $29 per share in May and have fallen 7% over the past month amidst a range of technology related profit warnings. Last year Intel reported $2.36 in annual earnings which values this market leader at 11 times annual earnings. Furthermore the company pays out quarterly dividends of $0.22 per share, for an annual dividend yield of 3.3%.

At these levels I am a long term holder of the stock.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.