From this week's Barron's, in "The Trader" column:
Throughout the market's turbulent week, shares of Intel continued their relentless upward march. For one thing, investors received fresh indications of strengthening chip demand. The Semiconductor Industry Association announced Monday that the industry's book-to-bill ratio rose to 1.15 in November, up from a revised 1.11 in October. The indicator has been improving steadily since dropping to an all-time low reading of 0.79 in March. Note well: The latest November figure just slightly topped last November's 1.13 reading, a reading that came just before the chip sector's fortunes began heading south late last year.
At Montgomery Securities' technology conference in San Francisco last week, Intel repeated its frequent assertion that demand for personal computers remains strong. Jerry Parker, executive vice president of Intel's technology and manufacturing group, reported that ``things look robust,'' with Intel factories running ``pedal to the metal.'' Intel, he said, plans to expand production capacity by 10% next year. Parker also confirmed that the firm had delayed until early next year the release of ``Klamath,'' a multimedia version of its Pentium Pro microprocessor.
That doesn't seem to bother anyone. Certainly, it didn't seem to disturb Tom Kurlak, the Merrill Lynch semiconductor sage. On Wednesday, Kurlak raised his 1997 earnings estimate for Intel to $9 a share, from $7.70, and raised his price target for Intel's stock to $200, from $160.
As The Wall Street Journal pointed out in Thursday's Heard on the Street column, Kurlak isn't the only analyst who's been raising estimates. One buy-sider who clearly believes the bullish view is Bob Stansky, portfolio manager of Fidelity Magellan. Fidelity last week disclosed that as of the end of October, Intel had become its largest stock holding. For the week, Intel rose 6 11/16, to 132 3/8, including a 7 3/4-point jump on Wednesday, and a 4 1/2-point retreat on Friday. Meanwhile, Cyrix, one of Intel's few rivals in the microprocessor business, eased 1 1/4, to 20 1/8, on news that co-founder Jerry Rogers had resigned as CEO. Isn't it nice to have a virtual monopoly?
Intel's remarkable surge is uncomfortably reminiscent of last year's mania for Micron Technology, the Boise-based memory chip company. We know, we know - Micron makes DRAMs, which are a commodity; Intel makes microprocessors, with almost no competition. Still, it smacks of deja vu. At the moment, Intel seems incapable of doing wrong, and last year at this time, people felt the same way about Micron. As it happens, Micron has begun regaining some of its old luster. At the Montgomery conference, Micron indicated that its fiscal first-quarter revenues would be up a smidge from the fourth-quarter level of $700.5 million. On the other hand, Micron acknowledged that spot prices for DRAMs have been sliding of late, and the company declined to predict whether further reductions loomed. But who cares about that? For the week, Micron shares rallied 1 1/2, to 35 1/2. |
