Intel Stock Jumps on Sales Optimism

The chips may be down, but don’t count Intel Corp. out.

Shares surged 3.3% on Monday amid optimism that sales at the world’s largest maker of microprocessors will improve now that a glut of personal computers seems to be shrinking. And any reports of Intel’s demise as a tech bellwether appear to have been premature, as the company helped propel Nasdaq to its fourth straight record close.

Though still off almost 20% from their record high in August, Intel shares climbed $2.63 to close at $82.38, near a two-month high.

The company is expected to report weak second-quarter earnings after today’s trading, but investors are betting it will predict an upswing during the rest of the year.

“The second half will be better than the first half,” said Jim Chen, senior analyst at Roger Engemann & Associates in Pasadena.

Santa Clara, Calif.-based Intel’s second-quarter profit is expected to fall to 68 cents a share, according to First Call Corp., from 92 cents a year ago.

Meanwhile, Houston-based Compaq Computer Corp., the world’s leading PC maker, is expected to break even in the quarter and would have had a loss if not for income from recently acquired Digital Equipment Corp., analysts said.

Compaq will release its results Wednesday before U.S. markets open. On Monday its shares rose $1 to close at $32.63 on the New York Stock Exchange.

Compaq had 10 weeks’ worth of inventory at the beginning of the year, but many analysts estimate that’s fallen to about four weeks. So Compaq is likely to ship more PCs for the third-quarter back-to-school buying season, which means it will buy more Intel microprocessors.

But not all analysts are convinced the troubles are over. “They moved the inventory down, but they didn’t get to their original goal of two weeks,” notes Stephen Dube of Wasserstein Perella Securities, who rates the stock a “hold.”

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* Bloomberg News was used in compiling this report.