Is Intel Capital Gains party coming to an end sooner than
Intel anticipated?

  o Intel started using capital gains as part of regular income
    thus tying market performance to its eps. This is again, I
    believe done to hide AMD Athlon factor, as well as to
    maintain its share price high.

    For Intel, a higher share price around $70-$75 usually results
    about 3 cents eps due to higher number of options gets exercised
   by employees resulting in increased tax benefits to the company.

  o I believe Intel  expected the capital gains party to last well
    into the year 2003 if not later at the burn rate of $600M - $700M
    per quarter.

  o Intel Capital had a peak unrealized gains of $9.8 billions by
    the end of Q1'00. During Q1'00, the unrealized gains went up
    by a whopping $2.4 Billions due to the strong market (see
    columns 'B', 'D', and 'E' in the table below.)

  o $2 Billions of the incredible $2.4 Billions unrealized gains
    increase in Q1'00 due to the strong market disappeared by the
    end of Q3'00 because of the market downturn during Q2'00 & Q3'00
   (see column 'E' in the table  below.)

  o Since the downturn in the market continued during the current
    quarter, especially in the segments that Intel capital is
    concentrated, I expect to see another major drop ( $600M - $850M)
    in the unrealized capital gains. 
           
  o Intel is expected to realize capital gains of about $730M
    this quarter, and Intel may have to sell more marketable securities
    than the company anticipated during the beginning of this
    current quarter.

  o I expect Intel Capital total carrying value to go down at a
    faster rate (see my estimate for Dec 21, 00.)

   IMO, the Capital gains will be completely drained by Q2, 01.

   This puts Intel in a tough position of finding another profit
   stream to supplement about 10 Cents/share eps the company has
   been deriving through realized capital gains.

   With declining ASPs, and increasing competition from AMD, this
   could be an impossible task to achieve. So look for eps decline
   in or before Q3'01.

   I believe that Intel won't be able to hide Athlon effect beyond Q2'01.

  o Intel is expected to realize investment gains of about $730Millions
    this quarter.

  o Intel started dumping LNUX (Via Linux Systems Inc) in October - ~762K
    LNUX shares were dumped at an avg price of about $33/share.

    Intel still owns about 2,780K LNUX shares from the 3,543,741
    LNUX shares that were acquired by Intel during LNUX IPO.

    Current price of LNUX is at $18 after the LNUX earnings
    warning today - that's about $37Millions of unrealized gains
    gone down the tubes just today ( part of Q3'00 Capital gains
    report was based on 3,543,741 LNUX shares valued at $46.25/share!) 

Intel Capital

          |            Marketable Securities             |         |
          |             (in millions)                    |         |
          |--------|-------|--------|--------|-----------|         |
          |        |       |        |        | Increase  |Non-     |
Quarter   |        | Unrea-|Total   |        | (decrease)|market-  |Total
Beginning |Invstmnt| lized |carrying|Realized| Unrealized|able (in |porti-
          |   cost | gains |value   | gains  |   gains   |millions)|folio
          |    A   |   B   |C = A+B |   D    |E=B+D-Bprev|   F      |G = C+F
----------|--------|-------|--------|--------|-----------|---------|-------
Dec 25, 99| $1,321 | $5,800| $7,121 | $327   |           | $1,009  |$8,025 
----------|--------|-------|--------|--------|-----------|---------|-------
Apr 1, 00 | $2,009 | $7,800| $9,809 | $449   |  $2,449   | $1,009  |$10.818 
----------|--------|-------|--------|--------|-----------|---------|-------
Jul 1, 00 | $1,601 | $4,600| $6,201 | $2,100 | ($1,100)  | $1,300  |$7,501
----------|--------|-------|--------|--------|-----------|---------|-------
Sep 30, 00| $1,648 | $2,900| $4,548 | $716   |  ($984)   | $1,309  |$5,857
----------|--------|-------|--------|--------|-----------|---------}-------
Dec 21, 00| $1,690 | $1,470| $3,160 | $730   |  ($700)   | $1,320  |$4,480
(Estimate)|        |       |        |        |           |         |
----------|--------|-------|--------|--------|-----------|---------|-------

I included the following table just as a food for thought. Let me here your
comments on this. Do you guys see any pattern here?

Cash & Cash equivalents:
------------------------
All numbers shown are in USD Millions.

            |Marketable| Cash       | Total Cash+| Change in    | Change in  |
            |Strategic | and        | short-term | cash Infusion| Cash tied  |
            |equity    | short-term | invstmnts+ | - Current    | up -invntry|
            |securities| investments| equity     | Liabilities  | & rcvbls   |
            |    A     |     B      | C = A + B  |     D        |    E       |
            |          |            |            | change/      | change/    |
            |          |            |            | cumulative   | cumulative |
------------|----------|------------|------------|--------------|------------|
Sep 25, 1999|  $4,102  |  $11,891   |   $15,993  |              |            |
------------|----------|------------|------------|--------------|------------|
Dec 25, 1999|  $7,121  |  $11,788   |   $18,909  | $710  / ---- | $58 / ---- |
------------|----------|------------|------------|--------------|------------|
Apr 1, 2000 |  $9,809  |  $11,216   |   $21,025  | $8    /$718  | $37 /$95   |
------------|----------|------------|------------|--------------|------------|
Jul 1, 2000 |  $6,201  |  $13,644   |   $19,845  | $1,246/$1,964| $725/$820  |
------------|----------|------------|------------|--------------|------------|
Sep 30, 2000|  $4,548  |  $14,007   |   $18,555  | $189  /$2,153| $570/$1,390|
------------|----------|------------|------------|--------------|------------|