Dear Mr. Burke,
I'm not going to argue the valuation of Intel. I'm OK with it; you're not. My question is, what happened to the predictions of Intel's terrible quarter? The answer here seems to be that it really was terrible, but it was inflated by stock sales and writeoffs of acquisitions. I agree that when evaluating prospects of future earnings you need to take all those costs into account. However, when deciding whether the quarter was terrible or not, people are generally comparing to the analysts estimates, which exclude those costs already. So for these purposes, the writeoffs are not relevant. Second, some of the stock sales are in the estimate. According (I think) to Dan Niles, if you took the extra stock profits back out, they still beat the estimates. So, no terrible quarter there yet. The fact that they didn't meet the "whisper number" means nothing, because those numbers are probably the phoniest things around.
But more importantly, according to many on this thread, Intel was supposed to fall far way short of any estimates because chip sales would be so bad. And they didn't fall way short. If you're right, why didn't they? If it's an inventory scam, the chips must be in someone else's inventory, because Intel claims very low inventories. They also said that they didn't think that their customers had big inventories (we know Gateway doesn't!). I'll assume that isn't some artful way of saying that they didn't look, so that they can think whatever they want. So if they aren't in Compaq's warehouses, where are they? I suppose that the answer must be in the distributors' warehouses.
What if Compaq says they are doing OK now, and skips a year of reporting big oversupply? What would you have to see to convince yourself that Intel is actually capable of selling more chips than people on this thread said they could? Remember that doesn't mean more than some phony whisper number.
Thank you,
Ross
On the wildebeest, I was thinking of what the herd looks like on migration, not what happens when the lions sneak up on a herd which is just standing around watching TV. |
