Read it and praise the Gods.........the chip cycle looks to be turning!
______________________________________________________
RealMoney.com : Thomas Kurlak
Intel's Margins Underscore Its Franchise Strength
By Thomas Kurlak
Special to RealMoney.com
01/15/2003 06:58 AM EST
Intel's (INTC:Nasdaq - news - commentary - research - analysis) fourth quarter looked good. Revenue grew 11% sequentially, about 4% more than recently revised Street estimates. And gross margin, as I expected, jumped by nearly 3 points to 51.6% from the third quarter. Earnings of 16 cents a share were up 45% over the third quarter.
That Intel still can earn a 15% net profit margin in this economy is testimony to the strength of its franchise and business model. And that franchise is even stronger, as Intel's market share hit a five-year high at year-end.
Microprocessor average prices (for use in PCs) were up in the fourth quarter, despite Street analysts' claims of weakness and oversupply. And with the introduction of several newer processors, such as the Centrino, which incorporates wireless capability, average prices are likely to trend upward this year.
I continue to expect 2003 earnings of 80 to 85 cents a share and Q4 '03 earnings to reach an annualized rate of $1.13. (And I expect Intel's stock to provide an above-average return this year.) Management's first-quarter outlook statement of sequentially flat-to-slightly-down revenues leaves room for improvement at the midquarter update and is characteristically subdued, which is smart at this stage. But a new head of steam is building, and one quarter this year (I don't know which), Intel is going to blow away the revenues and put to rest the issue of whether a new cycle has started.
Bears will explain away their low earnings miss this quarter by saying it was a seasonal blip. And that Q1 also can't be trusted as a guide of business trends because a reorder surge won't be sustained in Q2. But unlike last year, the economy is heading upward, and semiconductor capacity utilization is back up from 50% to 75%, making it a tighter chip market. And those PCs keep getting older while businesses and consumers are using them more.
Cont'd.....next post
--------------------------------------------------------------------------------
Tom Kurlak is the former semiconductor industry analyst for Merrill Lynch, now retired. |
