ML Comment: We believe that Intel's efforts to ramp its
Coppermine processor as fast as possible may have limited
the company's ability to supply the older, but higher-yielding,
Katmai processor. We draw two conclusions from
Gateway's preannouncement:
1. Q4 not at risk, but don't expect upside. Our unit
assumption of 29.1 million units for Q4 is fairly
conservative compared to 26.7 million units in Q3.
However given Gateway's challenge in getting
product from Intel we would not expect any upside to
our Q4 EPS and revenue estimates of $0.63 and
$8.15 billion.
2. Pricing pressures to become more intense. When we
reduced our intermediate-term rating for Intel in
November, we identified the need to respond
competitively to Advanced Micro Devices as one
factor that could put pressure on Intel's PIII pricing.
Gateway made it clear yesterday that it intends to
upgrade its relationship with AMD. The competitive
opening that Intel is giving AMD at this point only
increases the need for Intel to drop the hammer on
AMD with aggressive pricing once the volume is
available to satisfy customers.