Intel is not doing as well as it appears

PEOPLE WITH SHEDLOADS of shares in Chipzilla might be over the moon that the outfit has announced better than expected second quarter results.

Many analysts have been seeing Chipzilla's comments as a return to glory days and telling the world plus dog that a turnaround for the technology industry is certain.

However, Dow Jones has been looking at Intel's figures and is blowing a nose of caution.

It says that the giant chipmaker is benefiting from the idiosyncracies of its inventory dynamics, rather than improvements to the economy.

Yesterday Intel posted $8 billion in second-quarter revenue, well above the $7.3 billion Wall Street expected.

Chief Executive Paul Otellini said the results were the company's strongest sequential quarterly growth since 1988 and mark "a clear expectation for a seasonally stronger second half."

Tech stocks rose after Otellini said the market for computers appeared to be rebounding. Shares jumped seven per cent, fortune grinned and the people headed down the pub to party.

But Dow Jones was not impressed. It said that Intel's performance reflects the fact the company dramatically scaled back its inventory and benefited from strong but temporary demand from Chinese consumers.

Naysayers have been warning about not reading too much into Intel's figures. Some are even saying that a lot of its second quarter rebound will dissipate next quarter.

Basically Intel cut back production as it moved to deal with a glut of inventory and a deep recession that was crimping customer spending. Since then Chipzilla has flogged that excess and begun to ramp up chip production, a dynamic that fuelled its better than expected revenue. µ