I guess I approach Intel as a well oiled investment at this point rather than speculate on what could happen within their microprocessor business in terms of their 80%+ market share for that portion of their core.
The earlier link to Intel's latest quarter and a snip about the CC.
fool.com
During the conference call, Intel expressed as much optimism about the current quarter and the quarter to come as I can ever recall. CFO Andy Bryant said Intel is "more confident going into the third quarter than it has been in a long time." In addition, based upon conversations with customers it's expected that the third quarter results will be linear (i.e., sales should be relatively smooth during the course of the quarter).
In addition, Paul Otellini, Executive Vice President and General Manager of Intel Architecture Group indicated that he was very pleased with the second quarter results. Demand was unseasonably strong throughout the quarter. Intel was able to take advantage of its continued conversion to 0.18-micron microprocessor production, which led to record shipments during the quarter. Over 50% of the CPUs shipped during the quarter were manufactured via 0.18-micron manufacturing technology. It is expected that this figure will exceed 90% by year's end."
It's interesting that just as Intel has been preparing themselves as well as their investors over the past two years for transition, that the discussion has turned to what could derail one of the best performing companies in history. Not to worry, plenty of AMD and Intel discussion has been going on all over the Internet in the past year. I would imagine that plenty of investors playing both holdings as a 'basket' have been very happy with their returns. Also, plenty of discussion has been going on about the biggest of the big-cap technology stocks which happens to include Intel, Cisco and Microsoft at the top of the heap. None of them have been secrets or one product ponies for years. We've often discussed the maturity of each and the diversity that comes with this maturing process which has much of their growth coming from areas away from their core technology that led them to the dominance in the first place. I can't imagine GE just rolling over and fizzling out because they are 'big'. Likewise, these biggest big caps have positioned themselves in many areas as well as capital investment which has been both a source of heated debate and one of marvel. Management of all three have been well aware of the maturing process.
One of my favorite Fools, Phil Weiss (TMF Grape) wrote this piece on how Intel is changing back in March of this year. As a side note in terms of gross margins, AMD's gross margin has improved to 47% while Intel's was over 60% with management's guidance for 63% (plus or minus) going forward and AMD's management guiding for around 47% again in the upcoming quarter. Certainly both are doing well.
fool.com
The article is worth the read. Here's a snip discussing some of the inflection points that Intel has transitioned to for the future:
So, what is it that's driving all this change at Intel? It's really two things. One is that it wants to drive its future growth by entering some new markets that are growing more rapidly than the microprocessor market, and each of the markets above is growing significantly faster than Intel's core microprocessor market. The other is that while the PC was the center of computing during the '90s, Barrett expects that the Internet will assume this role over the next decade. This has led to a change in Intel's mission statement as well. Our company now aims "to be the preeminent building block supplier to the worldwide Internet economy."
True, we need to look under the hood of this large company, project and prepare ourselves for what might happen, what could happen and what will happen. There always have been competitive threats and will continue to be. Through all of that, the company has honed their 'healthy check up' quarter after quarter to continue to perform and reward shareholders. That doesn't mean that the future is going to be anything like the past, yet there will be signs of red flags showing in the quarterly numbers if something starts to crumble that makes investment in this mature investment in one's 'age mix' portfolio. It's not easy to find investments that have the kind of underlying business fundamentals of an Intel or a Cisco. These guys are going to be around in a decade.
If one has been holding these investments for a number of years, it's a great way to defer one's taxes by holding on to the more mature dominant companies as a strategy in the 'age mix' portfolio. If you screen all the public traded companies for net margins of at least 7%, you come up with 2000 companies. If you boost that up 10%, the list drops to less than 19% of all public companies. If you screen for companies over 20% in net margins - the list starts to get very short when looking for a number of investments available for inclusion in the 'A' team. If you run some fundamental criteria on all of the semiconductor companies, I think that you will find that Intel is on the top of the list in terms of the Rule Maker metrics. Once again, I'm talking about Intel as an investment. I'm not ignoring some of the issues you raised in terms of memory architecture and processor architecture, but there's not a lot we can do as investors about that as time moves forward except watch it all unfold. I guess I'll be watching and reading from my iBook. <ggg>
A couple of Intel propaganda reads follow. The most recent letter to shareholders certainly was not a discouraging outlook.
intel.com
Here are some features of the recent quarter:
intel.com
Here are some of the Fiscal Year 1999 fundamentals:
corporate-ir.net
The 23% revenue growth for a company as large as Intel and as mature as Intel is not bad at all. In light of my 'age mix' portfolio, I do hold a young semiconductor company with much higher growth in the form of Broadcom. We all have to make our own decisions as what strategies we are going to use, but I repeat that I see no compelling reason to alter my decision to remain invested in Intel.
BB |
