Intel Corp. (NASDAQ: INTC) came out last night and warned of lower margins. The culprit was only listed as lower than expected NAND flash memory chip prices. So tonight Intel now said it is looking for 54% margins, plus or minus 1%. Its previous guidance was 56%, plus or minus 1%. The interesting part is that Intel said all other expectations are consistent with the prior guidance given with its last outlook.
Shares are indicated down about 3% in early market trading this morning, which is far better than the situation would be if Intel had warned about processor sales. We would note that this had recently been downgraded at Goldman Sachs and at AmTech. We also just last week were pondering if Intel would have to lower its guidance again.
As this looks and feels like a bear market more and more each day, it is impossible to try to say that there is good news here. But if you break this down and if you take the reason offered at face value for this being tied only to flash memory, then you might be able to make the argument that its core operations are at least in good shape.
There wasn’t any super-fishy activity in its near-month options trading, so this news didn’t look spring loaded in a market that has had a hard time pricing in any bad headlines.
As the news was specific to NAND flash memory chips, it is hittingthose flash memory stocks the worst of the others. SanDisk Corp.(NASDAQ:SNDK) is perhaps the pure-play for flash memory stocks, and itsshares are putting in new 52-week lows. Its trading range over thelast year was $23.40 to $59.75. Spansion Inc. (NASDAQ: SPSN) isanother go-to stock in flash memory, and its shares traded down almost3% in after-hours trading last night. Unfortunately, it has had a pooryear with its 52-week trading being $2.69 to $12.83. This news is notgoing to bode well for a turnaround at Micron Tech (NYSE: MU) that just won’t turn around, although maybe it will force the company to more rapidly pursue some of the active divesting strategies we have laid out. Its shares are indicated down more than 1.5% this morning.
Intel shares are down about 3% at $19.38, still above that $18.05 low for the last 52-weeks. If this was news about weak processor sales that would be looking much worse.
Jon C. Ogg
March 4, 2008