Intel stopped working on 20 building projects around the world
09:24am EST 19-Mar-01 Needham & Co. (Dan K. Scovel 212-705-0322) INTC MU INTC.N
SEMICONDUCTOR INDUSTRY; CHIP SHOTS
March 19, 2001 Dan K. Scovel 212-705-0322
dscovel@needhamco.com
Semiconductor Industry: Chip Shots
Industry Items (SOX 541.26 -5.3%)
Negative Comments: A fund manager interviewed in Barron's this week is
extremely negative on the chip industry based on accelerating negative
fundamentals, and LSI Logic's (LSI, $16.23, NR) CEO is quoted in an EN interview
late last week expecting a worldwide industry revenue decline of 10% this year.
Our current working forecast is for a flat year, but persistent weakness may
well cause us to revise our expectations downward--yet again. While industry
business conditions are very weak, we believe the Barron's article overstates
the situation.
Intel (INTC, $27.88 -0.63, Hold)
1Q: $0.15 on $6.5 billion. 2001: $0.64 on $27 billion. 2002: $0.78 on $30
billion.
1GHz Mobile Pentium III: Expected to be announced today for $772, along with a
900MHz device and a 750MHz mobile Celeron, with 20 complementary PC system
announcements expected from Compaq, Dell, IBM, HP, Gateway, Fujitsu, Toshiba,
Micron, Sony, and others. The 1GHz part tops the current 850MHz notebook
offering, and comes with the SpeedStep technology that throttles performance
back to 700MHz to save power when not plugged in. We consider this announcement
positive for the company and believe it leads a competitive announcement by at
least a few weeks. The fastest desktop PC microprocessor is now a Pentium 4 at
1.5GHz.
Bear-on Valuation: Negative Barron's comments in this week's lead article on
Intel's valuation relative to other leading tech stocks. The publication also
picks on the company as the leading corporate venture capital investor with
likely deteriorating marketable security valuations, as well as unadjusted
private holdings listed at cost. We agree its relative valuation lacks
attractiveness at this time, as noted in the table below. Our earnings outlook
assumes $180 million per quarter in interest and other income that does not
include any potential realized gains or losses on investments. We expect
potential realized losses to be limited over the next few quarters.
Cutbacks: Early last week Intel delayed the $2.2 billion Fab 24 expansion in
Ireland by 12 months to mid-2003. Late last week it postponed indefinitely the
$250 million Mod 4 expansion to Fab 17 in Hudson, MA from its previous April,
2002 opening, as well as a 10-story, $124 million design center in Austin, TX
that was to be completed by the end of this year. The company has reportedly
stopped work on 20 building projects around the world. While the likely
potential impact to 2001 capital expenditures of these items is limited, we
continue to believe such actions increase the likelihood that this year's
forecast of $7.5 billion may decrease. |
