On August 24th, Berkshire Hathaway (BRK.B) released its Q2 2012 13F-HR report in which it showed that it liquidated its position in Intel Corporation (INTC). We believe that despite the fact that Berkshire’s CEO Warren Buffett protests his lack of understanding of technology stocks, we believe that Berkshire has more knowledge of the technology sector than people realize, including Buffett himself. After all, if Buffett was a total ignoramus about technology, Berkshire would not have sold off its position in Intel in Q2 2012 before Intel announced its Q3 2012 earnings warning. While Intel is certainly one of the bluest of the technology and general equity blue-chips, we believe that the declining demand for personal computers will result in the company registering flattish financial and investment performance. We were not privy to what price Berkshire received for its Intel shares but considering that Intel’s lowest price during the quarter was achieved on June 4th at $24.84, we can see that Berkshire got out at a good price relative to the $23.31 price as of September 17th.
On September 7th, Intel preannounced an earnings and revenue warning to the investment community. Intel cut its revenue range projection for Q3 2012 from $13.8B-$14.8B to $12.9B-$13.5B. This helped Intel’s projected gross margin for the quarter to slip from 63% previously to a revised level of 62%. The good news is that these new results are comparable to the $13.1B revenue and 61.9% gross margin achieved in Q3 2011. The bad news is that the steadily declining demand for traditional personal computers at PC makers like Hewlett-Packard (HPQ) and Dell Inc (DELL) is resulting in weak revenue and gross margin results at computer chip champion Intel. Intel is pinning its hopes on its new Ultrabook series of high-end subnotebook computer defined by Intel and manufacturers by its PC partners.
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