All,
I just posted this on the Intel thread in reply to a post form Paul E.
I wanted to post it here also to make sure that those who may not follow all the posts on the Intel thread, (like me), see it.
Paul,
I call your attention to my, exchange2000.com
In that post I gave my interpretation of Intel's Q3 results. I opined that the shift to JIT, or 'the build to order" manufacturing model, was a one time OEM phenomenon. I estimated the shift had caused a reduction of $.05+ to Intel's Q3's earnings. Therefore, earnings I believed, were actually $.02 better than the First Call estimates, rather than the $.03 earnings shortfall, that was reported.
"---Intel's raw materials inventory and finished goods inventory were actually down sequentially in Q3, despite revenues increasing sequentially. The only reasons that I can come up with for this phenomenon was that Intel made an inventory adjustment in the quarter. This I believe was done so as to accelerate moving out older classic Pentium's, and to adjust to their OEM's new "build to order" manufacturing model, (i.e. CPQ following a Dell method of manufacturing). Further evidence of this can be found in the decrease of Intel's average-days-sales-outstanding, by 4 days, to 43 days from the previous quarter. Therefore, both of these reasons would seem to suggest that the inventory adjustment was an aberration and a one time event that should not carry forward into future quarters.
In my estimation the 9 % reduction in average-days-sales outstanding probably accounted for another 5 cents in Intel's earnings shortfall for the third quarter."
I have often discussed on SI, my opinion that the job of the long term investor is to identify aberrations in "the market". By that, I mean, that investors should look for when "the market" misinterprets a past or future event. I believe this was the same thing that Ibexx was saying yesterday in her post #39506 , recommending investors focus on the long term fundamentals and not short term market fluctuations, or manipulations.
Therefore, as I have posted over the last week, with Intel at an unprecedented and relatively low price, I have been buying INTC Calls, trying to take advantage of the fact that I believed that analysts had misinterpreted Intel's inventory situation. This misinterpretation has now, hopefully, been clarified and rectified by Intel. Going forward analysts should recognize that JIT manufacturing was a short term, one time, phenomenon. An event which over time should have a positive impact on Intel, and was in no way an indication of weakening demand, (as was almost universally interpreted by other analysts).
Regards,
Jules |
