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San Francisco: Intel Corp is again expected to surpass Wall Street forecasts when it kicks off tech sector earnings this week, but analysts worry about a stock sell-off if its 2010 outlook isn't rosy enough.
Chipmakers, whose products are found in everything from personal computers and cars to smartphones, are emerging from the industry's worst downturn in decades and are expected to benefit from renewed spending on technology by corporations in 2010.

Analysts also point to the upcoming Chinese New Year holiday in February -- a season of high spending in the world's third largest economy -- as an indicator of robust end demand.

But some investors worry about a potential, short-lived correction in semiconductor counters. Shares in Intel, which gained more than 8 percent over the holiday quarter, have risen 30 percent over the past six months, bolstered by increased consumer spending in the absence of corporate demand.

"We're on the cusp of an enterprise spend cycle this year. We're on the cusp of improving consumer sentiment and consumer spending for notebooks," said Wedbush Morgan analyst Patrick Wang. But "Intel is cheap," he said, adding its valuation of about 11 times forward earnings for 2010, minus cash, was a historic low based on his data.

Intel, whose chips are found in more than three-quarters of the world's PCs, is expected to report earnings per share of 30 cents, excluding items, up from 4 cents a year earlier, according to Thomson Reuters I/B/E/S.

Distant runner-up Advanced Micro Devices Inc is expected to post a loss per share of 18 cents, excluding items, up from the year-ago loss of 69 cents, as it works to pay down debt and finish spinning off chip manufacturing arm Globalfoundries.

TD Ameritrade chief derivatives strategist Joe Kinahan said that as of Monday's close, Intel's options prices are implying about a 5 percent share price move in either direction post earnings, based on current volatility levels.

"As Intel is the first tech bellwether in the earnings season, there is also some extra anxiety and any type of positive report can send the shares significantly to the upside," he said. (Reuters)