UPDATE 5-Intel buoys tech sector with hopes of recovery

* At least 12 brokerages raise Intel price target

* View 2010 gross margin outlook as conservative

* Say Intel results will support broader tech sentiment

* Intel shares rise 3.3 pct; other chip shares also higher
(Adds analyst comments, PC sales data, updates shares)

By Ian Sherr

SAN FRANCISCO, April 14 (BestGrowthStock) – U.S. tech stocks jumped
higher on Wednesday after strong earnings and forecasts from
Intel Corp (INTC.O: ) further galvanized hopes that the
beleaguered technology sector’s recovery was underway.

Analysts say Intel’s better-than-expected revenue and
margin forecasts for the second quarter and 2010 had heightened
expectations for a faster and stronger recovery in everything
from computers to software, potentially triggering a sustained
stock rally. [ID:nN1382801]

Intel, whose chips power more than three-quarters of the
world’s PCs, said on Tuesday that business spending was growing
again and it was increasing capacity to meet
stronger-than-expected demand.

Dell Inc (DELL.O: ), which is highly reliant on sales of PCs
and servers to businesses, gained 5.3 percent. Hewlett-Packard
Co (HPQ.N: ), the world’s No. 1 PC marker, ticked up 1.4 percent.
International Business Machines Corp (IBM.N: ) rose 1.7 percent,
and software giant Microsoft Corp (MSFT.O: ) rose 1.2 percent.

And chipmakers Nvidia Corp (NVDA.O: ), Advanced Micro Devices
Inc (AMD.N: ), Texas Instruments Inc(TXN.N: ) and Micron Technology
Inc (MU.O: ) all traded higher as well.

“Judging by the stock reaction today, you have broadly
higher expectations than you did a day ago, and that’s fairly
evident from how the group has moved,” said Auriga analyst
Daniel Berenbaum, adding that Intel had helped to set a high
bar for the rest of the group.

A slew of brokerages, including Goldman Sachs and
Citigroup, raised their price targets for the company and
investors responded, pushing Intel shares up 3.3 percent to
close at $23.52.

Robert W. Baird analyst Tristan Gerra said the results
allayed investor’s concerns that the fourth quarter was the
peak for Intel’s gross margins. Now that Intel has said it
expects gross margins to remain near all-time highs, Gerra
said, it could propel a continued rally for the sector.

Many analysts said that this downturn for the tech industry
was different from those of years past, as many companies were
able to cut costs and manage inventory much more successfully,
allowing for an easier swing back into a recovery.

Wedbush Morgan analyst Patrick Wang said those factors may
have helped break the cycle of profit-taking that had followed
past tech sector earnings announcements.

“Everyone seems more optimistic this time around,” he said.
Although, with Intel’s spectacular earnings, he said
expectations will definitely be higher for other major tech


Industry watchers IDC and Gartner said on Wednesday that
global personal computer shipments had risen sharply in the
first quarter. [ID:nN14183063]

Intel reported a 44 percent surge in first-quarter revenue
on Tuesday and gave a current-quarter forecast that topped Wall
Street estimates.

The blow-out quarter and strong forecast confirmed
expectations that the chip industry was slowly, but surely, on
its way to reaching pre-recession growth levels after grappling
with a two-year downturn, when demand for PCs and consumer
electronics crashed.

Of 45 sell-side analysts tracked by Thomson Reuters
StarMine, 33 rate Intel a “strong buy” or “buy.” Ten rate the
stock a “hold” and two rate it a “sell” and “strong sell.”

Intel forecast a gross margin of 64 percent, plus or minus
2 percentage points, for both this quarter and 2010. Analysts
said the 2010 gross margin forecast was conservative.

Barclays analyst Tim Luke wrote that Intel may lift its
longer-term gross margin forecast to between 55 percent and 65
percent at its investor day on May 11, since the company beat
its target range of 50 percent to 60 percent in the last
several quarters.

Luke said Texas Instruments and Broadcom Corp (BRCM.O: )
should see a boost from Intel’s stronger outlook, but he did
not expect the same degree of margin and sales upside for
Advanced Micro, which is expected to report first-quarter
results on April 15.

Robert W. Baird & Co said Intel’s 2010 outlook should
alleviate fears that margins have peaked, since the forecast
was above the first quarter’s 63 percent. Baird analysts raised
their price target 15 percent to $30 and repeated Intel was
their top large-cap semiconductor idea for 2010.

Lack of competitive pressures suggest Intel will continue
to gain significant market share this year, resulting in
above-seasonal pricing trends, they wrote to clients.

But other analysts voiced concerns about the seasonal
head-winds Intel may face in the PC market. BofA Merrill Lynch
analyst Sumit Dhanda raised his price target to $25 from $23,
but kept a “neutral” rating, citing doubts about whether Intel
can sustain growth in the PC market at above-seasonal levels.

Jefferies & Co, which maintained an “underperform” rating
on Intel, said the company faces head-winds from slowing
desktop PC growth and its average selling prices will be
pressured by the shift to low-end laptops.

Stock Market Report

(Reporting by Ian Sherr in San Francisco; additional reporting
by Neha Singh and Manasi Phadke in Bangalore; editing by
Tiffany Wu, Gerald E. McCormick and Tim Dobbyn)

UPDATE 5-Intel buoys tech sector with hopes of recovery