3 Tech Giants Citi Is Watching

Citi is keeping a close eye on three of the world's largest tech enterprises: Intel Corporation (NASDAQ: INTC), Hewlett-Packard Company (NYSE: HPQ) and Oracle Corporation (NYSE: ORCL).

Citi analysts Walter H Pritchard and Tyler Radke said that aside from the currency, Oracle's Q3 numbers "look reasonable."

"We forecast organic cc license decline of 4% y/y vs. (street @ -3% adjusted) which is off from last Q's -1% reflecting a tough y/y comp of +6%," Citi wrote in a note. "With major currencies continuing to weaken vs. US $ since the 12/17/14 report, we estimate currency is an incremental + 170 bps headwind vs. guide and most consensus numbers."

Citi expects Q3 operating margins to decline 270 bps year-over-year "on the back of fx headwinds / mix shift translating to EPS of $0.67 vs. street $0.69." The analysts maintained their Neutral rating and $41 price target.

Intel's Problems…

Citi analysts Christopher Danely, Shaon I Baqui and Philip Lee said that Intel "lowered its 1Q15 revenue guidance 7% from $13.7 billion (down 7% QoQ) to $12.8 billion (down 13% QoQ), below our prior estimate of $13.6 billion (down 8% QoQ) due to weaker than expected PC demand and inventory reductions in the supply chain."

"The company specifically cited soft demand for small and medium business desktops as well as macroeconomic and currency issues in Europe," the analysts added. "Intel did not change its 1Q15 gross margin guidance of 60.0% and operating expense guidance of $4.9 billion."

Citi maintained its Neutral rating but dropped its PT from $34 to $31.

…Are Problematic For HP

Citi analysts Jim Suva and Joe Yoo said that with January and February PC data points marginally softer than expected, Intel's negative pre-announcement "underscores further potential downside to PC demand."

"This fundamental risk coupled with additional currency headwinds cause us to meaningfully reduce our sales and EPS forecasts," they added.

Citi thinks HP is a Buy but lowered its PT from $45 to $41.

Disclosure: At the time of this writing, Louis Bedigian had no position in the equities mentioned in this report.