Intel Corp. blew the market away in its second quarter but the company's strong performance is also indicative of a dysfunctional market that has tried and again failed to control its destructive boom and burst cycles.
All the 41 financial analysts who track Intel Corp. got the company’s latest financial results wrong, by a mile and a half.
They are not totally to blame. Much as it did at the height of the real-estate driven downturn, the market pendulum is swinging again too far, demonstrating the dysfunctional nature of an industry stressed by unpredictable cycles of under- and over-capacity; a destructive trend fueled often by the failure of executives to curb the natural instincts to grab share at the expense of profits.
The Intel analysts’ consensus second quarter sales estimate for the world’s No. 1 chip vendor was off by almost half a billion dollars and they missed their profit forecast by a whopping 8 cents per share, a monster gulf for people who get paid substantial amounts to forecast numbers people use daily to bet billions of dollars in investment and retirement funds.
Were these military analysts involved in identifying where heavy projectiles would land during hostilities, they would be cashiered for predictions that result in excessive collateral damages.
Instead, in the business world, the analysts live to try again. Most are now reviewing and updating their third quarter sales forecast for Intel, which they previously said would be $10.92 billion. Since Intel itself is forecasting September-quarter revenue would be “$11.6 billion, plus or minus $400 million,” the revised consensus estimate will go up significantly.
The analysts get another chance again and again—though we realize they could mislead us again—because we understand the art or science of economic divination is dependent upon too many unknown factors, including vague, deliberately misleading, incomplete or corrupt data from numerous sources, including the companies being tracked.