I pay little attention to Intel because I don't think it is a gorilla. As a king, it doesn't dominate a very interesting market. Nevertheless, it has been very hard to miss Intel's repeated surprises (is it 5 of the last 7 quarters?) over the last year and a half. But I have been very surprised that the Intel "mystique" (as another article in Tuesday's NYT put it) has let Intel management avoid the beheading Lucent's management suffered. couple missed quarters in 1999 (?) followed by three straight in 2000 would be enough to at least get the institutional holders questioning whether Barrett was the correct person to succeed Grove. But then again, go figure why Armstrong still at AT&T?
When making comments like that, it would be nice if you could back it up with numbers from the balance sheet and income statement of both Intel and Lucent to prove any 'failed management' execution.
When one connects the dots of the entire value chain of the PC industry (cyclical that it is - and killed off at least once every 3-5 years since the TALC began for it), the slowing growth from Microsoft, Intel, the other semis and the box makers down to the retail stores that sell the product, one can certainly say it is not a company specific issue for any of them.
Intel's previous quarter (Q3) which you label a 'surprise' because they did warn, just as they have for this quarter. What did the 'warned Q3' end up being? I've posted this here before, but it's always worthy of another glance.
• Revenues were up 19% from the y/y Q3 to a total of $8.731 Billion.
• Gross Margin was up 9% to 63.9% from 58.7% in the y/y period.
• Net Income was up 39% from the year ago period for a total of $1.948 Billion.
• Operating income was up 39% to $2.857 Billion.
• Net Margin was up 17% from the year ago period to a nice healthy number of 22.3% from 19.1%.
• Flow ratio improved 5% to .92 from .97 in the year ago period.
• Cash-to-debt improved 30% as cash rose from $11.35 Billion to $14.81 Billion
---(That's right. Intel has about 3 X the cash as AMD's entire market cap!)
Boy! If Lucent could have had some 'surprise' quarters like that when they warned.....
Q4 - Intel's gross margin will not suffer. They had cancellations of orders which caused them to have to warn on the revenues. Management assured the investment community that expenses would be down as well which accounts for them to maintain their gross margin. They said revenues would be flat from Q3 due to cancellation on orders. So we can assume their revenues will be around $8.731 Billion. Where is that in relationship to Q4 in 1999? Intel reported revenues of $8.212 Billion in that quarter. This means y/y revenue growth would be only 5%. If you study Intel's revenues going back from 1995 to 2000, you will find instances of flat sequential growth, flat y/y growth or evening declining revenue growth in sequential or y/y at times. Q4 y/y growth from 1997 to 1998 was 17%. 1998 to 1999 was 7.8%. 1999 to 2000 will be around 5% based on what management said this week.
Obviously, not stellar revenue growth or anything to right home about. However, the quarterly 'check-up' on the internal numbers from the balance sheet and income statement have been a "role model management" example. Something that Lucent would and should aspire to, but they are not even close. The PC industry is very tied into the economic growth curve. Hence, we're right in the middle of that slow down and once again the 'death of the PC' pundits come out and kill it off. There will be a move in the other direction as product upgrades and cycles move forward.
Depending on the 'amount' of slow down that those raised interest rates over the past 2 years creates as they work their way through the economy, we'll see revised targets in many other companies as well that are outside of the PC industry. These will most likely show up in Q4 conference calls as well as Q1 and Q2 as companies that might lag in slowing growth experience it going forward.
BB |
