NEW YORK (MONEY Magazine) - Intel's earnings report last week bitterly disappointed investors, leading to a sell-off in the stock of more than 15 percent. Since then, at least nine brokerage firms have downgraded shares.

Now, investors who already own the shares want to know whether to hang on. And those who don't own it may be wondering whether Intel (Research) is a bargain at today's cheap price.

Let's start with the bad news. Intel's results not only came in below guidance, but there's a sense that the company's own internal forecasts were off the mark.

Intel blamed poor PC sales for part of the shortfall, and yet the evidence suggests that sales on a global basis were more or less on track.

Intel also ran short of certain components, a problem that some analysts think should have been solved by now.

In addition, chief competitor AMD has grabbed several points of market share from Intel over the past year. Analysts worry that may be a continuing trend.

Finally, Intel's own forecasts are hardly encouraging. Revenue this year is expected to make only single-digit gains, while profit margins may be squeezed. The net result could be an actual decline in earnings for 2006.

Taken together, those problems certainly justify a depressed stock price. But from a long-term point of view, just how serious are they?

First, let's recognize that Intel was downgraded by so many brokerages after last week's earnings announcement because they were all recommending the stock. This is certainly the kind of situation that leads to overreaction.

Intel does need to refocus its strategy, and that may take several months and then need several more months before concrete results are visible. But all the evidence is that Intel is ready to start coming back.

AMD has gained market share before, but Intel has invariably recaptured the lost ground. Moreover, Intel is fully capable of fighting a price war that hurts results in the short run but boosts them over the long term.

In the fourth-quarter report, Intel also announced that it would spend $6.5 billion on research and development and $6.9 billion on capital spending. Some analysts believe that immense spending will actually increase Intel's technological lead over competitors.

The company's corporate customers seem confident about Intel retaining its primacy. Why else would Apple Computer be switching to Intel chips?

Another good sign: Intel just hiked the dividend 25 percent and authorized a $25 billion share repurchase plan.

Here's my conclusion: The outlook for the economy is uncertain, although I'm basically optimistic about this year and next. Intel's 2006 results probably will be lousy. Some analysts think the share price will fall further in the next few months, perhaps dropping below $19. They could be right.

But I think Intel will come back and that it's difficult to catch the exact bottom in a situation like this. If I owned the stock I would hold it. If I were a value investor, I would consider buying it -- and I wouldn't wait indefinitely to try to catch the bottom.

Before the most recent earnings report, Intel was forecasted to grow at a 15 percent annual rate. Average in one year that's flat or even down slightly, and the compound annual growth rate over five years is still above 11 percent.

So if you believe, as I do, that Intel will be back on track by 2007, the question is really whether you'd buy a stock with double-digit growth, a 1.8 percent yield and a price/earnings ratio around 15. Sounds like a solid value buy to me.

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