I ran across Tekboy's cute little poll at the Fool about the nomer being used or being discussed over here concerning the microprocessor gorilla, Intel.
Wow! All over the Internet and in the media we've got discussions about the horsemen that led the PC technology adoption life cycle and attempts to hang them all. We've got theories of a new bull-market trend line which begins in January of 1999 and has been bounced off of since then a few times (3250 would be that trend at the moment). This theory states that the new bull market is being led by the new leaders surrounding the next technology adoption life cycles of the IP/Broadband and network application markets as well as wireless handhelds and devices.
We've got a very mature company called Intel that will come in with around 17% y/y revenue growth this quarter as well as sequential quarterly growth in what is normally a flat growth from Q2 to Q3 period for Intel. The market has shaved off market cap from Microsoft, Intel, Cisco, JDS Uniphase and some of the previous bull market leaders like Worldcom, Dell and Applied Materials while lopping on market cap to the companies emerging in the next 'phases' of technology in terms of TALC.
It's quite a transition as the market weighted index has certainly taken a hit with Dell, Worldcom, Intel, Microsoft, Applied Materials, Qualcomm, Yahoo!, JDS Uniphase, etc... while underlying issues like Network Appliance, Siebel, Brocade, Broadcom, Juniper, Extreme, EMC, Ciena, i2, Oracle, Sun, Gemstar and many others have forged ahead during the course of the year to all be positive year to date in terms of return.
That doesn't signal anything to me other than overlapping technology adoption life cycles, growth rates and the markets reaction to diversifying in the various growth rates available. As you know, that's what I call my 'age mix' portfolio strategy in technology. I fail to see how this removes the position that Intel holds in the microprocessor industry. A fluctuation between 75 - 85% of the market share, healthy fundamentals and the all important question - is the PC dead? Did a little economic condition throughout various geographic regions put some growth pressure on the anticipated revenue stream for the PC industry?
I don't know what we're all connecting to the Internet with, but chances are a few more boxes are going to be sold over the years maintaining some sort of a decent revenue stream for Intel. As their foray into other markets ramp up, investors have to continue to decide if holding some of the more mature companies either fits their portfolio needs or not. Future options include bandwidth adoption with some processor intensive applications allowing what comes through the net to catch up with and surpass the processing power we currently have. Yet, the market has been able to 'kill off' the PC industry at least two times in the past decade. Will it bounce back this time? If it does, the choice remains obvious who leads the market.
I continue to admire and value the position that Intel holds in the PC technology adoption life cycle. The maturity of the TALC doesn't change that position, but does offer the opportunity to understand that maturity.
Let's take a look at Intel's quarterly y/y revenue growth during the time frame of the three quarterly revenue warnings:
Q3 2000 = 17 to 19% projected revenue after the warning
Q2 2000 = 23%
Q1 2000 = 12.5%
Q4 1999 = 7.8%
Q3 1999 = 8.8%
Q2 1999 = 13.8%
Q1 1999 = 18.3%
Q4 1998 = 17.0%
Q3 1998 = 9.3%
Q2 1998 = slightly down ($33 million less than the year earlier quarter)*
Q1 1998 = -7.4% ($447 million less that the year earlier quarter)*
*The two previous 'stumbles'.
I fail to see how the Q3 of this calendar year 2000 is comparative to the Q1 and Q2 negative revenue growth back in 1998 as Intel making a big stumble/blunder/screw up or whatever you want to call it. I'll be anxious to see the actual report and listen to the CC to see if it is such a problem or if the market has been all too happy to write off Intel even though they will report one of their top 4 quarters in terms of revenue growth in the past 11 quarters. I want to separate the revenue growth from valuation issues. If we just look at the health of the company, I see no sickness at this point. It will be interesting for Q4 guidance and I believe this is what the market has discounted already with the share price going from $75 down to $39. Of the revenue growth range found in the past 11 quarters, Q4 of 1999 had only a 7.8% growth from the year earlier period.
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