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Technology Stocks : Intel Corporation (INTC)

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To: Patient Engineer who wrote (44027)	1/5/1998 9:19:00 PM
From: Paul Engel	Read Replies (1) of 186894

Patient Engineer - Re: " I have to agree with most of what you say about Intel. They are unbeatable as a microprocessor vendor....So how does Intel get EPS growing again?...I suspect you disagree. I would love to hear your reasoning." Thanks for your thoughts - it's been a long time since I heard from you! Your concerns are valid but they miss some obvious points. You assume that ASP's will continue to drop. According to Ashok Kumar (who may be blowing smoke) Intel actually RAISED ASP's in Q4 from $215 to $240: {===================} news.com ""We forecast microprocessor units to have grown about 5 percent sequentially and 14 percent from the year-ago period to 22.8 million. Microprocessor ASPs are expected to have recovered from the depressed level of $215 in the third quarter to about $240 in the December quarter." {===========================} Now how did they do this? High performance Notebook CPUs (Tillamook) are priced at a premium (I'll address Intel's "inventory" situation in another post) - well above $300. Intel still has no competition here and AMD/Cyrix are only making "noise" thus far. Business PCs - these sales results are not reported because most of these are done through sales channels that the media does not have direct access to. Corporations and businesses buy higher priced, more fully featured PCs and have their own PC food chain - rewarding their best personnel with the newest hardware. I have friends/brokers at three Wall Street top line firms - and they recently gave ALL their agents brand new Pentium Pro or Pentium II machines. One company requires their agents to have a notebook PC as well - and guess what they are paying for these and whose chips are Inside? (Good guess!) Workstations - Moving rapidly to Intel/Windows NT. Cadence announced internally that all their new software WILL RUN on NT. LucasFilms is using 100% Intel Pentium Pro/II and Windows NT running Studio MAX 3D for their special effects. Avid Technologies has ported (or will soon complete) all their video editing software to Pentium/Windows NT. Accept the fact that PCs are used daily by many technical users who need and demand the last MegaHertz in performance - and that is INTEL (and a few DEC Alphas). Now consider this - the MediaGX and sub $1000 PC's bought in the past 12 months are going to disappoint a lot of people in the next year or so when they want more uumph to run Windows 98. If and when Windows NT supersedes Windows 9x, ALL THOSE subzeros wil be candidates for REPLACEMENT - NOT UPGRADES. And their owners will think long ans hard about buying on the cheap for price and NOT performance. Servers - this market is exploding - know any business without a WEB SITE or department server? Sun gets the cream of this but Intel/NT gets the bulk. And Servers have more than 1 Intel CPU per box - and that number will increase (CPU's per server) as networking increases. And you already mentioned MERCED - Big Silicon. This will be the Lingua Franca of high end enterprise server/applications from year 2000 on out. In the maen time, Intel is rapidly bringing their 0.18 micron into production readiness while the 0.25 micron process is ramping into full production in four fabs. Die sizes will drop, costs will drop, power will drop and Intel will crunch out more MegaHertzes. Profit margins will ultimately be restored and hopefully rise. Intel will also be exploiting their new Flash memory technology (Strataflash) and their networking products. This may not lead to sudden ASP jumps (Kumar's prediction excepted) but a gradual increase ASP's, starting in the 3'rd or 4'th quarter of this year. Paul

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