Mary. re; Intel competing. Of course Intel can compete. But the questions for investors are revenues, margins and earnings. Since early October Intel's 1998 earnings estimates have dropped 13%, triggered by a few pennies miss to Q3 consensus.
According to Lehmans figures, the ASP's for PII and P55C are down 40% to 50% from Q3'97 to Q1'98. As an example, Q3 PII 233 = $530, Q1 = $268. (Even the P54C, a very mature product, drops 15-20% over this period). Think about it. The product generating the bulk of Intel's revenues has decreased in price 40-50% in two quarters.
This clearly illustrates Intel's ability to compete. And they can go a lot further down the curve while still making money. But in order to maintain historic revenues, earnings and margins I think the market has to shift totally to PII. P55C may have the margins, (even at $130 for a P55C200, or $89 for the 166), but it won't generate the revenues and earnings. It's interesting that the Q1'98 price for a PII 233 is $118 less than the Q3'97 price for a P55C 233, ($268 vs $386).
If Intel's earnings were to drop to say $3.50 in 1998, how much is the stock worth. (And that's still a heck of a lot of earnings). Even if they meet the $3.80 predicted by Lehman Bros, what is the stock worth?
So, I never said Intel couldn't compete. But the fact they must now compete has implications for the investor. |
