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Technology Stocks : Intel Corporation (INTC)
INTC 50.59+4.9%Feb 6 9:30 AM EST
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To: John Hull who wrote (2993)8/20/1996 11:43:00 AM
From: Mark Brophy   of 186894
 
Re: Intel as a cyclical company

I regard Intel as a cyclical company, which is the reason I wouldn't pay for it with a P/E = CAGR. I differ from mutual fund managers in my assessment of the length of the cycles.

Each time the CPU instruction set changes, a new cycle has begun, so the cycles last about 10 years. Your post of earnings Q1/93-Q2/96 reflects a period of stable growth in the middle of a cycle. That's a good time for a conservative investor. Naturally, the mutual funds stayed away, due to their memories of the previous downturn.

The next cycle starts with the P7. The company will have good earnings for at least 3 more good quarters from the aging product line, so nobody will be able to sue the 12 executives that bailed out.

I hope the company can produce something big from the Lockheed and/or HP deals, but it looks a lot riskier to me. Other big companies like Cisco, Microsoft, and IBM are buying high-growth small companies to diversify their portfolios and replace their aging products. Maybe Intel is doing the same thing internally, but it looks risky from the outside with it all under wraps.

It looks really bad when the CEO sells $18m of stock. He surely doesn't need that much to buy a house or pay his medical bills.
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