Intel Sees a Bottom, but Investors Have Doubts

Intel (NASDAQ: INTC) called a bottom in the PC market late Tuesday, but investors acted like they didn’t believe it.

Intel posted first-quarter earnings and sales that were down significantly, yet still managed to beat expectations.

But the biggest news was an accompanying statement by CEO Paul Otellini that read, “We believe PC sales bottomed out during the first quarter and that the industry is returning to normal seasonal patterns.”

But the chip giant declined to issue formal revenue guidance for the second quarter and kept its gross margin outlook at historically low levels, suggesting that a recovery may still be uncertain, and investors sent the company’s shares 4% lower in after-hours trading.

Intel reported first-quarter earnings of 11 cents a share on a 26% drop in sales to $7.1 billion, but both the top and bottom line were better than the Thomson Reuters forecast.

Intel’s gross margins of 45.6% were two points better than expected, but the company kept its profit margin forecast the same for the second quarter when Wall Street was hoping for better. Intel also declined to issue a formal sales outlook, citing “continued economic uncertainty and limited visibility.” But the company added that “For internal purposes, the company is currently planning for revenue approximately flat to the first quarter.” Analysts were looking for a 5.7% sequential increase.

eBay (NASDAQ: EBAY) was another company with an after-hours surprise, announcing plans to spin off its Skype unit in an IPO.

Stocks fell during the day after a weaker than expected March retail sales report suggested that signs of a tentative economic recovery remain shaky.

Lam Research (NASDAQ: LRCX) rose 3% on an Oppenheimer upgrade.

EMC (NYSE: EMC) managed a small gain on a new high-end storage system — even as partners like VMware (NYSE: VMW) and Brocade (NASDAQ: BRCD) fell.

NetApp (NASDAQ: NTAP) rose 2% after settling a government pricing probe.

The Nasdaq fell 27 to 1625, the S&P 500 lost 17 to 841, and the Dow tumbled 137 to 7920. Volume rose to 8.72 billion shares on the NYSE, and 2.31 billion on the Nasdaq. Decliners led by a 25-12 margin on the NYSE, and 18-9 on the Nasdaq. Downside volume was 70% on the NYSE, and 64% on the Nasdaq. New highs-new lows were 7-55 on the NYSE, and 12-19 on the Nasdaq.