Intel Speaks and and Wall Street Soon Feels Better

Is it all up to Intel Corp.?

Twice over the last two months good news from the computer chip giant has helped swing the overall mood of the stock market.

The first time was July 16, when the company announced strong second-quarter earnings in the midst of the market’s deepest sell-off since 1994.

That report was widely credited with restoring investor confidence in the technology sector just as the stocks were on the verge of melting down because of lousy quarterly earnings news from Motorola and other tech leaders.

Intel says it didn’t time its report to help the market. Nonetheless, the Dow Jones average’s intra-day summer low--5,170--was on July 16.

On Monday, Intel did it again: It announced that sales this quarter will be above expectations, putting it on track to top $19 billion in sales this year. That helped power Intel’s shares up $5.625 to a record $94.25 Tuesday. More important, many other tech stocks also zoomed Tuesday, and Intel’s announcement clearly is more tonic for the market’s resurgent bulls.

It’s no secret, of course, that Intel and Microsoft are the two tech-industry bellwethers, having displaced IBM in recent years. Personal computers have been tech’s big growth business, and Intel’s chips are the brains of most PCs while Microsoft’s software is the primary PC operating system. So as the PC industry goes, they go.

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But some analysts say Intel has taken on a greater responsibility, working aggressively both to manage the inherent cyclical nature of the PC business and to guide investors as to what to expect in terms of tech-industry growth. “I think they’re trying to manage Wall Street’s expectations in a constructive way,” says Daniel Klesken, analyst at investment banking firm Robertson Stephens & Co. in San Francisco.

Earlier this year, for example, when Silicon Valley was awash in rumors that PC sales were falling off a cliff, Intel consistently told Wall Street that there was no basis for those rumors. In fact, industry growth has remained healthy all year.

Analysts say the company also has increasingly been taking its message directly to institutional investors, rather than relying on Wall Street. “They manipulate public opinion better than any company I’ve seen,” says one analyst. He added, only half-joking: “If Intel wanted our [analysts’] opinion, they’d give it to us.”

But Intel’s talk would be nothing without credible results to back it up. Over the last four years, the company’s progression of ever-faster PC brains has kept demand booming for new machines with more and better applications. “More and more, they’re not tied to PC unit growth--they’re responsible for it,” notes John Marren, analyst at Morgan Stanley & Co. in San Francisco.

And because Intel has managed that progression of chips so well--especially in terms of pricing (remember, chip prices begin to fall almost immediately after a new family is introduced)--the old cyclical nature of the PC business has been smoothed out significantly. The dependability of the company’s growth is a key reason why investors are paying 20 times Intel’s annualized per-share earnings for the stock today, double the price-to-earnings ratio of a few years ago.

Tom Dunlap, Intel’s general counsel, says the company’s only goal in the investor guidance it gives is “to do what’s right for our shareholders.” They can’t be unhappy with the results: The stock now has risen tenfold just since 1991.

Making Money the Club Way: The National Assn. of Investors Corp., umbrella organization for 25,207 investment clubs nationwide, holds its annual conference starting Thursday in Orlando, Fla. And its small-investor members may be feeling a bit smug: Based on the 10 stocks that were most popular with the clubs at the start of this year, the average club is beating the market.

The top 10, including McDonald’s, Merck, Intel and PepsiCo, have produced an average gain year-to-date of 13.6%. In contrast, the blue-chip Standard & Poor’s 500 stock index is up 10.9% in price so far this year.

Of course, not every club owned the top 10, but the list is a good indication of the type of diversification the clubs seek. Within the top 10, two stocks have been huge gainers: Intel, up 66%, and Coca-Cola, up 41%. They more than made up for the three losers in the top 10: AT&T;, down 12%; Motorola, down 9.6%; and RPM, down 4.5%.

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Club Favorites

Here are the 10 favorite stocks of investment clubs, ranked by the number of clubs owning each stock at the beginning of this year.

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Clubs Stock price: Stock owning Jan. 1 Tues. Chng. McDonald’s 8,435 $45.13 $47.75 +5.8% Merck 6,601 65.63 68.38 +4.2 PepsiCo 5,543 27.94 29.00 +3.8 Motorola 5,410 57.00 51.50 -9.6 AFLAC 4,445 29.00 34.63 +19.4 Intel 4,287 56.75 94.25 +66.0 AT&T; 3,970 64.75 57.00 -12.0 Wal-Mart 3,843 22.25 27.13 +21.9 RPM Inc. 3,814 16.50 15.75 -4.5 Coca-Cola 3,464 37.13 52.25 +40.7 Avg. gain +13.6% S&P; 500 index 615.93 682.94 +10.9%

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Note: Prices adjusted for stock splits where applicable

Sources: National Assn. of Investors Corp., Times research