Tickers in this Article: INTC, AMD, NVDA, DELL, MSFT, AAPL, HPQ
With all of Wall Street's eyes upon it, Intel (Nasdaq:INTC) did what it had to do - the world's largest chip company delivered a quarter that should be good enough to calm some of the near-term fears about the PC and consumer electronic markets. By the same token, though, there is nothing in the guidance or management's commentary to suggest that business will be booming again anytime soon.

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The Quarter That Was
Intel reported that third quarter revenue rose a little more than 3% sequentially (and more than 18% annually) to about $11.1 billion - a number that was slightly higher than the company's earlier disappointing guidance. Within the numbers, Intel reported that PC group microprocessor sales were up more than 2% sequentially, and made up about 57% of the company's revenue base.

Below the top line, results were again stable but not stellar. Gross margins slid more than a full point sequentially, but were up strongly (about 830 basis points) from the year-ago level. Operating income performed a little better however, climbing 60% on an annual basis and nearly 4% sequentially. Inventory levels are also a closely-watched statistic with Intel, and the company reported an acceptable 2.3% sequential increase.

The Road Ahead
Management guidance was basically a cut-rate Goldilocks - not too cold (or at least not cold enough to spook investors), but certainly nothing better than lukewarm. In-line guidance probably will not panic investors, but the indicated sequential growth in the fourth quarter is still lower than its historical norms. On a slightly more positive note, management does seem to think that a lot of the excess inventory in the PC channel has been largely burned off. If so, that should take some of the pressure off of Intel, and other PC-related chip companies like Advanced Micro Devices (NYSE:AMD) and Nvidia (Nasdaq:NVDA).

Longer term, Intel still needs to prove that it can be a major player in the post-PC world. The company has acknowledged that Apple's (Nasdaq:AAPL) iPad will cannibalize some PC sales, but management seems confident of its place in non-Apple tablet devices. Time will tell; chips designed by ARM Holdings (Nasdaq:ARMH) and Qualcomm (Nasdaq:QCOM) have supplanted Intel in some PC alternatives, and Intel needs to prove that it can do better than it has in the smartphone market so far. (For related reading, see A Tale Of Two Cities In The Chip Space.)

The Bottom Line
Bulls are going to point to the acquisitions of Texas Instruments' (NYSE:TXN) cable modem business, McAfee, and Infineon's wireless business as the company positioning itself for the future. Skeptics will say they are signs of desperation and a failure to anticipate market trends. Time will tell.

In the meantime, Intel looks cheap but not dramatically cheaper than other high-growth has-beens like Dell (Nasdaq:DELL), Microsoft (Nasdaq:MSFT), IBM (NYSE:IBM) or Hewlett-Packard (NYSE:HPQ). Patient investors can clip coupons and probably expect market-matching returns (with more volatility), while hoping that Intel can regain past profitability, free cash production and valuation levels. Doing so would likely make Intel's stock a real winner, and there does not appear to be all that much down-side risk in the meanwhile. (For related reading, see KLIC Goes Clunk.)

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