Morning Commentary: Intel convertibles mixed after guidance cut; Microchip slips on hedge

By Rebecca Melvin

New York, March 12 – Chip giant Intel Inc.’s convertibles were mixed early Thursday as shares slipped after the Santa Clara, Calif.-based company cut its first-quarter revenue outlook, citing lower-than-expected demand and lower PC supply chain inventory levels.

The Intel 2.95% convertibles due 2035 were outperforming as buyers stepped into this issue, a New York-based trader said.

“They are up if anything,” he said. The bonds were around 123.

The Intel 3.25% convertibles due 2039, which are more equity sensitive, fell about 5 points on an outright basis to 155.699, according to Trace data. And they were in about 0.25 point on a swap basis as some outright holders turned sellers in the early going, the trader said.

Intel shares were lower by $1.29, or 4%, at $31.04.

Intel said it expects first-quarter revenue of $12.8 billion, plus or minus $300 million. It had earlier forecast $13.7 billion, plus or minus $500 million.

The negative news wasn’t affecting other convertible semiconductor names significantly, the trader said.

“There’s some small stuff, but nothing to speak of,” he said.

Microchip Technology Inc. was a little weaker, the trader said, amid disappointment that the Chandler, Ariz.-based semiconductor company didn’t get the investment-grade rating that the markets were hoping for.

The Microchip 1.625% convertibles, of which $1.5 billion priced last month, were seen at roughly 102.625 bid, 102.75 offered versus Wednesday’s closing share price of $49.01.

In the early going, the Microchip shares were up 19 cents, or 0.4%, at $49.20.

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