Thread,
This week's Barrons gives bad reviews for Intel (and Amazon). Here's an excerpt of those horror stories (INTC at $40 next year).
I know Barron's is being read by rocking-chair based six-pack-joes, but...
Those lines are from David Tice, manager of Prudent Bear fund.
Yes, I know, Tokyo is up 5% right now...
Regards,
MiB
--- snip---
interactive.wsj.com
(paying subscription needed)
...
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. |
