Closer look: Intel earnings

-Avg. Estimate, Thomson Financial: $.19 per share profit on $8.54 billion revenue

It has taken a long time, but investors and analysts appear to be in Intel’s corner again.

For the past couple of years, the Santa Clara-based chipmaker had been losing the image war with scrappier Advanced Micro Devices (AMD). While AMD concentrated on designing more efficient chips, Intel seemed to blithely crank out pricey power-guzzlers, confident that consumers would shy away from low-cost computers that didn’t have high gigahertz numbers and “Intel Inside.”

But Intel hit a wall earlier this decade. Qualities like energy efficiency and heat reduction became a more important part of the computing experience for consumers and businesses, and Intel’s hot and expensive chips didn’t fit the bill. As a result, AMD was able to begin stealing market share from Intel as major customers like Hewlett-Packard (HPQ) and eventually Dell (DELL) started offering more systems with AMD inside instead.

Now, after dithering around a bit, Intel appears to be getting back on track (see Intel’s one-year stock chart at left). An example: AMD took a gamble and decided to develop new four-core computer chips with an efficient design that it bet Intel would be unable to quickly match, but Intel took the opportunity to quickly release its own less elegant, but still functional, quad-core chips. If Intel succeeded in getting enough customers to embrace its quad-core offering, it would be able to take the wind out of AMD’s sails – and to some extent, that appears to be happening.

But more than that, Intel has gotten back some buzz. Perhaps the best example: Charismatic Apple (AAPL) CEO Steve Jobs invited Intel CEO Paul Otellini on stage during Apple’s Worldwide Developer Conference last month, and gave Otellini a custom-made award to thank him for being such a good partner to Apple. Steve Jobs is the biggest star in the tech world right now, and that kind of recognition gives Intel the kind of cool factor you can’t buy in stores.

There are a few major things I’ll be listening for during Intel earnings:

1. Revenues. The overall sales number will allow investors to gauge demand during the quarter. Compare this number with the same quarter a year ago, when revenues were just over $8 billion. That wasn’t a particularly strong quarter, so the comparison shouldn’t be too tough.

2. Margins. If Intel maintained decent profit margins, it will suggest that it got the better of AMD in the price wars. This is particularly important in laptops and mobile devices, which are among Intel’s fastest-growing (and lately most profitable) areas.

3. Forecasts. Assuming Intel doesn’t miss numbers in a big way, the thing most likely to actually move the stock is management’s forecast for the remainder of the year. The third quarter and especially the fourth are traditionally strong for PC sales – last year Intel did nearly $9.7 billion in revenue for the quarter.

If Intel executives play it safe, though, executives will give conservative guidance for the rest of the year. The biggest factor affecting revenues might well be Microsoft (MSFT) Windows Vista – no one knows how the operating system will appeal to consumers in its first holiday season on retail shelves. But there are also little boosts on the horizon for Intel; Apple, which has been gaining PC market share lately, introduces its Leopard operating system in October, which should spur hardware sales of the Intel-only Mac lineup. So will executives take a cautious tone on second-half sales or an optimistic one? That will make all the difference.