Intel Q4 estimates raised by Lehman

Lehman Brothers said it has raised its fourth quarter profit and sales forecasts for Intel Corp, citing a slight increase in average selling prices for chips.

But the broker recommended investors sell the stock ahead of the company's analyst meeting on Dec 6, due to its "high valuation".

At 10.46 am in New York trade, Intel was down 0.19, or 0.59% at 32.13 while the Philadelphia Semiconductor Index (Sox) was 11.89, or 2.23% lower at 521.28.

Lehman analyst Dan Niles now expects the chip giant's three months to December profits to come in at 10 cents a share on sales of $6.8 bn, compared to 8 cents and $6.6bn previously.

Intel said in a business update earlier this year that it expected sales for the fourth quarter to be in the range of 6.2 to $6.8bn, but Niles believes that the chip group will raise that forecast.

"We believe that Intel will raise its Q4 revenue guidance to the high-end of their prior range and increase the gross margin forecast to 48% from 47%," Niles said.

He cautioned however that the expected recovery in the chip industry is still some way off.

"We continue to believe that this is a U-shaped semiconductor recovery and not V-shaped and with a price/earnings ratio of over 50 for 2002, we continue to recommend selling into the earnings update of Dec 6," he said.