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Technology Stocks : LSI Corporation

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To: Andy M. who wrote (19290)	7/15/1999 12:36:00 AM
From: shane forbes	Read Replies (1) of 25814

//ot That still does not answer the question as to why I should be paying more for a company earning less. It's like going to McDonald's ordering a happy meal then paying them more and asking them to hold the fries and the bun... No denying the weakened competition and that may certainly be the big picture going on here - but even that does not hold as much water as one may think as the EPS numbers for next year were also reduced. And as I said earlier it is virtually impossible to speak to anyone who does not own some shares of INTC - INTC's market cap is actually $225 billion and that means something like $1 out of every $20 (closer to $30 now I guess?) in the stock market is in INTC stock. Can you imagine for a moment what would have happened if INTC 'honestly' sucked in Q2? That loud sucking sound you would have heard would be the market crashing. I recall Q1 1998 - the INTC warning was the coup d'etat. What INTC needs is a quality manufacturing company someone like say a TSM saying we are going to take xxx design and manufacture it for y% less than you. Whether this can actually happen remains to be seen... Anyway let's give this a month or so. That should give everyone enough time to figure out things for themselves and not be influenced by the analyst schpeak. What do they say when the analysts are falling over themselves saying it's a good quarter after a company missed expectations? Buy or Sell... Answer that correctly. L/T intc will be fine - i/t I am not so sure. Think for a moment which would be a better INTC if INTC had the choice - XEON + Celeron + Pentium III Intel or just a Pentium III + Xeon Intel. Intel used to phase away one generation and produce another for 'our benefit' (and their pocketbooks). Except now we don't quite need the speed. Today we paid more for less INTC earnings this year and next. Kinda very weird. The Buy Stocks with Earnings Momentum Theory in Reverse. The other argument is that INTC's P/E is too low. But that too does not hold water. 35 is quite high. This is the highest since 1989 and remember INTC had a lower P/E during the PC heyday in the early to mid 90's. Well the whole market is high one might say? Then step aside or exercise some prudence I would say. Too much liquidity again and no one knows what to do with all their extra money... Finally the most interesting thing from INTC's numbers is that it may be saying that the PC market is relatively healthy and INTC's 400 mil reduction in distrib inventory just bodes well for a strong end market going forward. If so then this makes sense as INTC's fortunes are still very directly tied to the PC market. Still that does not explain the magnitude of INTC's revenue woes. Just for fun - I used INTC's guidance that things are just normal thank you and speak to IR about how H2 behaves. Well I used that information to see that INTC's Q3 over Q2 is traditionally about 7% above Q2. So this means before yesterday's results we would have expected 7.1 b in Q2 and 7.6b in Q3. Now after the results we got 6.75 b in Q2 and say 6.85 b in Q3. What a joke - $1.1 billion went up in smoke over those 2 quarters and everyone's still smiling because GMs are going up. Well the bottom line is important and there is no way they can capture the lost profits with a revenue shortfall of this size. unless of course they have a monster Q4 - something in the neighbourhood of 9.35 billion or 37% higher than Q3 of say 6.850 b. I am using historical norms that show INTC should be at +17% H2 over H1. This in turn produces rev. growth of 14% YOY and meshes with SIA forecasts. On the other hand INTC has not had quarters with 35% sequential growth. The most appears to be about 25% once in the last 5 years. Pretty amazing quarter they had then. So say they come up with +25% in Q4 over Q3 that leaves about a 800 million shortfall for the year still over their H2 forecast. Anyway give it a month and let's see what happens. The stock market reacts every minute - companies and economic trends take much longer. We'll see over the i/t what happens...

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