Intel Earnings Raise Questions about Tech Analyst Forecasts

Last Updated Jul 20, 2011 6:37 PM EDT

Up through yesterday, Wall Street expected Intel (INTC) to jam on the brakes. Not a meltdown, but a sudden recognition that PC sales wouldn't support the growth the company expected. So much for disappointment, as Intel flattened the investor naysayers with 22 percent year-over-year revenue growth and a 10 percent increase in net income and more of the same forecast for this quarter.

That's one big disconnect between equity analyst expectations and vendor guidance. But Intel's earnings should raise a broader question. In a global market, with such countries as China, India, Russia, and Brazil riding rockets of economic growth, are the long-standing sources of market insight -- Gartner, IDC, and the like -- really to be trusted? If not, what does that do to market analysis and planning for virtually every company in high tech?

Wall Street analyst predictions of quasi-doom does seem silly given how Intel has historically created artificially low expectations so it can triumph at earnings time. Don't people get wise eventually? And yet, given some important context, you might understand how it could happen.

For example, market research firm Gartner estimated that PC shipments grew only 2.3 percent in the quarter just ended. There is a bit of miscalculation in comparing such numbers. Gartner or IDC both create forecasts and compile historic checks. In this case, the 2.3 percent would have looking in the rear view mirror.

A good portion of the chips that Intel ships, on the other hand, are for PCs that have yet to be built. There's a lag involved, so direct comparison tells you little to nothing. You'd have to compare the chip count to expectations of future PC sales, which is a far less accurate undertaking.

What's going wrong that leaves the tech market watchers so far off? Do they work off a business model that places too much emphasis on the numbers from traditional major vendors?:

A quarter ago, Intel handily beat earnings expectations and said it expected 2011 worldwide PC sales to grow in the "low double digits," well above consensus, saying independent forecasters were missing millions of PCs now being built by small manufacturers in China and other emerging markets.But many investors remain skeptical and believe Intel will be forced to reduce its PC growth outlook by around half, either with the release of its second-quarter results or later this year.
Maybe that point about analysts not looking in the right places has something to it. The markets for tech products continue to change with the shifting nature of global business and development. If so, what other fundamental product types might the analysts incorrectly forecast? And how many business decisions do executives base in part on data that has gone past its sell date?

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    Erik Sherman is a widely published writer and editor who also does select ghosting and corporate work. The views expressed in this column belong to Sherman and do not represent the views of CBS Interactive. Follow him on Twitter at @ErikSherman or on Facebook.