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By Barbara Grady
SAN FRANCISCO, Dec 20 (Reuter) - As the world's largest
maker of computer chips, Intel Corp has certainly
benefited from the recent wave of computer purchases by
businesses both large and small, and with a host of nifty new
consumer products just around the corner, industry experts
predict Intel's best days are still to come.
"Two things are happening in the PC market that have not
happened in a long time," said Robertson, Stephens analyst Dan
Niles.
"You've got a major corporate upgrade going on and you've
got a heck of a lot of stuff coming out in the consumer
market," that will drive consumer PC buying.
Indeed, with devices such as digital video disk (DVD)
drives and PC's powered by Intel's new multimedia chips due to
arrive on store shelves early next year, many analysts are
predicting Intel's stock price, which has doubled in the last
six months, could hit $200 sometime next year.
On Thursday, Intel rose $2 to $137.75.
Niles said the semiconductor giant is "at a major
inflection point," using a phrase coined by Intel's Chief
Executive Officer Andy Grove to describe a situation where a
lot of forces are converging at once to change a business's
environment.
Not only does Intel already dominate the personal computer
microprocessor market, but its Pentium family of chips is also
quickly becoming the standard for corporations seeking to
upgrade their computer systems to Microsoft Corp's
more powerful Windows NT operating system.
On top of that, Intel has found ways to make its
manufacturing more efficient, a move which is sure to instill
fear in the ranks of its competitors.
Its top manufacturing executive said last week that Intel
has plans in place to squeeze about 10 percent more production
out of existing fabrication plants next year than it planned.
Hambrecht & Quist analyst Rob Chaplinsky estimates Intel
will produce 20 percent more PC microprocessors next year than
in 1996. With production rising faster than its costs, Intel's
gross margin could reach the low 60 percent range, Chaplinsky
said, up from the third quarter's already strong 57.2 percent.
"The subtle thing with Intel is it has been valued in the
past as a semiconductor company and now it is beginning to be
valued as a growing monopoly," said Bob Herwick, president of
Herwick Capital Management.
As the dominant microprocessor supplier, it avoided the
worst effects of the inventory glut that swept the
semiconductor industry in 1996 because its view of demand is
not blurred by competition, he said.
Reaching $200 next year would mean a multiple of 25 times
the $8 a share estimate many analysts have for its 1997
earnings. That, Herbert notices, is less than the growth of
the other proprietor in the "Wintel" monopoly, Microsoft, which
enjoys the roughly same 90 percent market share in the PC
operating system market that Intel does in the PC
microprocessor market.
Niles also targets a $200 share price for Intel, while
Montgomery Securities' Jon Joseph said he sees it hitting $175
in the next year.
According to First Call, the average mean estimate for this
quarter's earnings is $1.82 a share -- a whopping 86 percent
hike from last year's fourth quarter. For 1997 the analysts'
consensus is for Intel to earn around $7.76 a share.
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