Shorts having a ball bashing intel in Barron's article...
Fleckenstein: The last few days have been the first time that anyone's been
forced to sell them. I've heard enough stories about margin calls that the
average investor is beginning to get a glimmer of the notion that Wall Street has
been selling them a bill of goods. Not to pick on Intel, but what people still don't
realize is that it'll be lucky if it only drops to 40 -- where it sold the last time its
quarterly earnings were in the 60-cent range. At that point, its business was
accelerating, not decelerating.
more intel bashing in another article in barron's this time David Tice
He puts Intel in the same boat. Most of Intel's growth is coming from its
lower-end chips, so average selling prices are declining, and with them, profit
margins. Historical gross margins of 60% are trending toward 50%, and Tice
sees them falling to the mid-40% range. "They've always been able to move the
customer along to the faster PCs and sell the higher end chip that generates
larger margins," he observes. "But that game is over."
A spurt in PC sales won't bail out Intel, Tice claims. Dramatic price cuts in
1996 spurred 30% annual growth in PC unit sales, he notes, but even today's
falling prices haven't juiced unit growth above 10%. Microprocessor clones
from Advanced Micro Devices and the Cyrix division of National
Semiconductor have just enough market share to weaken Intel's pricing power
at the low end, where demand is strong.
In the past six months, Intel's year-over-year earnings are down 30%. Tice
thinks 1999's numbers will be even worse and that Intel, now in the high 70s,
would be more fairly valued in the 40s. |
