BT Alex. Brown & Cowen downgrade INTC, SS Barney, Lehman, Cowen cut estimates
NEW YORK, June 1 (Reuters) - Shares of computer chip giant
Intel Corp fell more than four percent in very heavy volume
early Monday after the company warned of a delay in its
next-generation processor, Merced.
Shares in Intel fell as low as 68-1/8 in early activity,
down 3-5/16 or 4.6 percent from their 71-7/16 Friday close.
Intel issued the warning shortly after the close of trading on
Friday.
Several Wall Street analysts scurried to cut ratings and
earnings estimates on Monday after news volume production of
Merced would be delayed to mid-2000 from a 1999 target.
Merced is not expected to provide a large portion of
Intel's sales anytime soon, but the chip is considered to be an
important part of the company's earnings outlook because of its
expected rich profit margins.
The absence of Merced, "makes the difference between a
decent earnings story and a mediocre one in 1998," said Cowen &
Co analyst Drew Peck.
Peck, who lowered his rating on Intel to neutral from buy,
said he expected the delay to cost Intel $0.25-0.26 a share in
earnings in 1999.
The company may be able to recapture some lost sales with
its lower-end prducts, Peck said, but any replacement sales
would not contribute the "rather extreme margins" he was
expecting from Merced, which he said could sell for about
$1,500 compared to production costs of about $100.
Not all analysts saw the delay as a major cause for
concern. Goldman Sachs analyst Joe Moore, for example,
continued to recommend purchase of Intel.
"The company had guided that Merced would be an immaterial
amount of revenue in 1999," Moore said. "Even if they had hit
the original schedule, I don't think they would have had any
real revenue until fourth quarter 1999 anyway."
Morgan Stanley reiterated a strong buy rating on Intel.
But the full-fledged Intel bulls were in the minority.
BT Alex. Brown cut its Intel rating to market perform from
buy and analysts at Lehman Brothers and Salomon Smith Barney
both cut earnings estimates on the company.
Salomon Smith Barney analyst James Barlage said he lowered
his 1999 estimate on Intel by $0.35, to $3.70 per share, while
keeping a buy rating on the stock. Lehman maintained its rating
on Intel, but the firm already had a relatively low neutral
rating on the stock. |
