Joan and all,
I posted at 9:43 am re. H&Q's update and increase of eps. Some excerpts of his report (issued Dec 18, 96) are as follows:
* "...our initial microprocessor shipment projections in the Dec quarter were conservative because we believed Intel could not meet this record demand for rocessors. We now believe Intel has managed to increase its microprocessor output and will therefore be able to ship more micorprocessor units than we had originally anticipated..."
* "This increase in microprocessor volumes can be attributed to Intel's pushing its factories harder (running the operations in overtime) and an improvement in manufacturing yields at the 0.35 micron factories. We estimate that these factories manufacture approximately 90% of Intel's microprocessors including the Pentium 133, 150, 166, 200 and Pentium Pro 200 MHz. We now estimate that Intel's microprocessor unit shipments will be up approximately 16% from the September quarter driven by trong unit demand. With these higher than expected unit shipments, we believe Intel will experience stronger gross margins than we had originally anticipated...."
* "Although Intel's August pricing policy was very effective in stimulating Dec quarter's processor demand, we don't believe Intel is experiencing a major increase in blended average selling prices. We have there fore conservatively kept the average selling price relatively flat in our model and attribute the gross margin expansion to the increase in unit volumes. In addition, as Intel sees very strong microprocessor and chipset sales, the richer product mix improves overall company gross margins. Considering these two factors, we are estimating that Intel's overall gross margin in the Dec quarter will expand to 60.4% compared to 57.2% in the Sept quarter."
OUTLOOK FOR 1997
* "Intel has confirmed that Q1-97 demand for microprocessors is very strong and is therefore virtually sold outfor the March quarter. We believe that Intel should be able to at least equal the December quarter shipments in the March quarter, but we have modeled some upside due to an increase in manufacturing performance.One concern we have is whether or not the market is truly soaking up strong CPU demand......Our model is estimating that microprocessor units for Intel, up approximately 16% from the September quarter, will be primarily attributed to the fact that channel inventory of PC and microprocessors are quite lean as the industry just completed its 9 months inventory correction period. Going forward, we are modeling a more modest growth rate for quarterly shipments...."
* "We estimate that approximately 86 million PC units will be shipped in 1997 (up 20% from 1996) of which 90% will contain Intel CPUs. Including servers as well, Intel could ship approximately 88 million microprocesors in 1997."
* "1997 will be an exciting year for PC sales driven by Intel's rollout of MMX, the continued corporate 32-bit upgradecycle, the emergence of the Japanese consumer electronic giants entering the PC market, and a host of new technologies like 3D graphics and DVD. We believe this strong CPU demand will continue to present a rich product mix for Intel and therefore gross margins should be sustainable in the low 60% range.
* Based on the above, "we are raising our Q4 earnings estimate to $1.86 on revenues of $6.03 Billion and $7.81 on $25.1 Billion in revenues for 1997."
* "...new target price for the stock is $175 based on 22X CY 1997 EPS estimate."
Enjoy the ride!
Ibexx
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