Barret's pep talk via 3rd party. Sounds something that might be appropriate
for the captain's speech on Titanic (or was Itanic :-), I forget)
01:58pm EDT 27-Sep-01 Salomon Smith Barney (Jonathan Joseph +1-415-951-1887)
INTC: Pep Talk from CEO Barrett
SALOMON SMITH BARNEY
Intel Corporation (INTC)
INTC: Pep Talk from CEO Barrett 1M (Buy, Medium Risk)
Mkt Cap: $143,980.1 mil.
September 27, 2001 SUMMARY
* Yesterday, Intel CEO Craig Barrett gave employees
SEMICONDUCTORS worldwide a pep talk via conference call. According
Jonathan Joseph to people who heard the call, the takeaway from the
+1-415-951-1887 talk was that the company is fundamentally strong,
jonathan.joseph@ssmb.com its strategy sound, and that in this tough
Ramesh Misra environment they would seek to reduce costs through
+1-415-951-1883 belt tightening, salary cuts, and reduced headcount
through attrition. We do not believe the call was a
"setup" for a preannouncement of the quarter.
* Discussing the current tough environment, Barrett
said that industry (not Intel) revenues would likely
fall 25% this year, compared to the worst previous
year, which was 1985, when they declined by 15%.
Intel revenues this year, he said, would be at the
level they were 3 years ago (in 1998 revenues
reached $26.3 billion; we are currently forecasting
2001 revenues of $26.4 billion, -21.8% yoy), but
that the company has increased headcount by 20,000
since then.
FUNDAMENTALS
P/E (12/01E) 41.8x
P/E (12/02E) 29.9x
TEV/EBITDA (12/01E) NA
TEV/EBITDA (12/02E) NA
Book Value/Share (12/01E) $5.33
Price/Book Value 3.9x
Dividend/Yield (12/01E) $0.08/0.4%
Revenue (12/01E) $26,387.0 mil.
Proj. Long-Term EPS Growth 25%
ROE (12/01E) 14.7%
Long-Term Debt to Capital(a) 2.4%
INTC is in the S&P 500(R) Index.
(a) Data as of most recent quarter
SHARE DATA . RECOMMENDATION
Price (9/26/01) $20.90 Current Rating 1M
52-Week Range $46.69-$19.30 Prior Rating 1M
Shares Outstanding(a) 6,889.0 mil. Current Target Price $40.00
Convertible No Previous Target Price $40.00
EARNINGS PER SHARE
FY ends 1Q 2Q 3Q 4Q Full Year
12/00A Actual $0.36A $0.50A $0.41A $0.38A $1.66A
12/01E Current $0.16A $0.12A $0.10E $0.11E $0.50E
Previous $0.16A $0.12A $0.10E $0.11E $0.50E
12/02E Current $0.14E $0.16E $0.19E $0.22E $0.70E
Previous $0.14E $0.16E $0.19E $0.22E $0.70E
12/03E Current NA NA NA NA NA
Previous NA NA NA NA NA
First Call Consensus EPS: 12/01E $0.50; 12/02E $0.67; 12/03E NA
SUMMARY (CONTINUED)
* In an effort to reduce expenses, he said average employees (with bonus) will
be given an 8% pay-cut this year, while top employees would receive a 50-60%
cut. Though the decision on a second, already promised bonus, has been
deferred to mid-October, it seems likely that one will also be cut.
* The company currently has 88,000 employees. Several reports suggest that
internally, Intel would like to see further attrition of 5,000, or more
employees. The plan announced several quarters ago to seek early retirement
from 5,000 employees is running ahead of schedule. Management is concerned,
however, that massive layoffs would put Intel in a tough position should the
market turn up in 2002.
* We believe Q3 revenues and earnings are coming in line with our previous
estimates, and will not be affected by recent events and an apparent downturn
in consumer confidence. What is still unknown is the outlook for Q4. As we
have mentioned in several notes, we expect to cut industrywide semiconductor
revenues by 5-7% from their previous levels due to the negative impact of the
WTC attacks. We will be reviewing Intel earnings along with other
semiconductor company earnings.
No change to our 1M rating or our 12-18 month price target of $40. The stock is
currently trading at a price/book multiple of 3.9x and a price/sales multiple
of 4.7x, both below their long term mean, and below their 1998 troughs, which
was the last cyclical downturn for the group.
INVESTMENT THESIS
NA
COMPANY DESCRIPTION
NA
ADDITIONAL INFORMATION AVAILABLE UPON REQUEST |
