Intel Q4 Profit, Strategy in The Spotlight

Intel Corp. (INTC) is seen posting a higher quarterly profit next week amid strong sales of laptop computers, but analysts want to hear how the top chipmaker is dealing with a component shortage and a growing threat from rival Advanced Micro Devices Inc. (AMD)

Even so, Intel is also poised for a strong year as it debuts a new line of laptop processors, kicks off a program to turn PCs into home entertainment centers, and reaps the benefit of new manufacturing technologies that let it make smaller, more efficient chips, analysts said.

"With a meaningful edge on manufacturing technology for most of 2006 and a revamped product lineup coming, we think that 2006 will be a solid year for Intel, especially in the rapidly growing notebook market," Merrill Lynch analyst Joseph Osha said in a report.

Intel, which makes microprocessors that run 90 percent of the world's personal computers, is expected to earn net income of $2.61 billion on revenue of $10.56 billion in its fourth quarter ended Dec. 31, according to Reuters Estimates.

That works out to 43 cents per share, up 30 percent from 33 cents per share a year earlier. Intel reports financial results on Tuesday after the close of U.S. stock markets.

Last month, Intel disappointed Wall Street when it forecast revenue that was lower than many expected, due to a shortage of chipsets -- the cluster of secondary chips that surrounds the processor.

That means there is not much room for Intel to surprise with stronger-than-expected fourth-quarter results, but many analysts said they think the shortages will ease in the first, current quarter.

Citigroup analyst Glen Yeung said several factors may help Intel buck a seasonal quarterly decline in revenue typical for the first three months of the year.

"Chipset shortages ought to ease ... and when adding in incremental business from Apple, initial build of Viiv-related desktops, and expected strength in Yonah-related notebooks, an above-seasonal first quarter should be expected," Yeung wrote in a note to clients.

Computer industry trend-setter Apple Computer Inc. (AAPL) this week unveiled its first laptop powered by an Intel chip, a new mobile processor originally known as Yonah. Meanwhile, Intel is rolling out its Viiv program aimed at making PCs fit more naturally into living rooms.

Yonah, now called Core, is also Intel's latest crack at a dual-core chip with twin processing engines that can handle multiple tasks, and could help the company regain market share lost to AMD.

AMD's dual-core processors have helped it in the markets for laptops and also servers, the computers that run corporate networks, and Osha of Merrill Lynch said expectations that AMD will keep grabbing market share have weighed on Intel stock.

Intel shares dipped 0.7 percent to close at 25.79 on Friday. The shares have risen about 13 percent over the past year, but the company has a forward price-to-earnings ratio for 2006 of 16, compared to 39 for AMD.