Intel Corp. lifted spirits after Thursday's bell, announcing that it expects revenue for the March quarter to be between $9.2 billion and $9.4 billion, as compared to the previous range of $8.8 billion to $9.4 billion. 

The move prompted Lehamn Brothers, a Wall Street watching research firm, to revise its estimates for Intel, with an more narrow sales target for the quarter.

"We have adjusted our Q1 sales estimate from $9.1 billion/27 cents to  $9.3 billion/31 cents," Tim Luke, a Lehman Brothers analyst, said in a report this morning. "In general we believe that after a strong start to the quarter in January, linearity in the quarter resulted in a slightly weaker February with a solid March expected, largely in line with expectations."

Even on the high end of the guidance, however, Intel will see a decline from its Q4 2004 revenue of $9.6 billion. Lehman's revenue numbers come in down 3 percent to down 5 percent sequentially for the quarter.

Intel further said in its statement that the Q1 gross margin percentage is expected to be approximately 57 percent, plus or minus a point, as compared to the previous expectation of 55 percent, plus or minus a couple of points. The chip giant said this was primarily due to lower than expected 65nm start-up costs and microprocessor unit costs.

"We believe the lower start-up costs are due to increased efficiencies in part because of more automation within the fabs," Luke said, estimating the costs were $100 million below expectations. "Near term we believe utilization is also a benefit, as the fabs are full with the company catching up on production for chipsets and, to a lesser extent, microprocessors."

Lehman raised its Q1 margin estimates for Intel to 57 percent from 55 percent on the announcement. But the firm predicts a slight Q2 fall.

"We believe Q2 margins will likely see a slight dip (we model approx 56 percent) as start-up costs will increase and revenue will be lower again sequentially before more sustained expansion in the seasonally strong 2H 05," Luke continued. "In 2H 05 we also expect more cost-effective production on 65nm may benefit margins."

Intel made no further updates to its guidance today.  The company is scheduled to report its Q1 on April 2.

By: DocMemory
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