Re: Barron's
Even by the low standards Barron's sets for their "let's help our short friends" mud-throwing efforts, today's INTC cover piece should be an embarrassment for the folks at parent Dow Jones. When vulgar analogies such as "demand for Intel's
top-of-the-line Pentium chips faded faster than underwear
at an orgy" passes for analysis, you know you're dealing with a rush-job that never saw an editor's desk before soiling the pages of what is supposed to be one of America's leading financial publications.
Aside from its crude language, Palmer completely misses the obvious implications of his own reporting. The sub-$1000 PC was for INTC a wake-up call the same way the 1995 arrival of the Internet was for MSFT. And just as MSFT turned on a dime in response to its challenge, so did INTC. So successful was INTC in recapturing the low end of the PC market with its Celeron initiative that AMD's stock, after a brief rise from the mat last year, is back trading at 1983 levels and NSM, after having acquiring upstart Cyrix amid great fanfare, was forced to fold its PC processor tent altogether. Moreover, to ensure its ability to lead the low-end of future markets, INTC has invested significantly in the StrongARM technology it acquired from Digital. And INTC has aggressively established beachheads in the networking chip market through its Level One and related acquisitions making it clear that no high-growth area of chip technology is safe from INTC competition.
Having demonstrated its ability to compete and win market share in the toughest of market segments and having built the world's most efficient semiconductor operation, Barron's would now have its readers imagine that it is INTC that should be worried about incumbents SUNW, HWP, and IBM as it trains its guns at the lush margins this trio has long enjoyed in the high-end server market. Indeed, Barron's acknowledges that the server market is growing at a torrid pace and that "...most agree that we are looking at a total chip server market which could quickly eclipse PCs in importance and size." Yet the best caveats Palmer can come up with are straw-man "what ifs" that amount to little more than the sort of boilerplate one expects to find in prospectuses: "Competition may prove stronger than expected", "The market may develop more slowly than anticipated", etc.
The culmination of this patchwork of platitudes is an amazingly precise sub-60 target price which is curious given the large open-interest in INTC October 70, 65, and 60 puts. Readers can draw their own conclusions as to whose interest is being served by this piece, but investors would be wise to take advantage of the buying opportunity that Barron's is trying so hard to present this week. |
