Hi Mary, from your resident pessimist,
Yes, these are the kind of products I think Intel will intro to grow to $50 Billion over the next five years. Digital photography devices, appliances, set-tops, dumb terminals, various StrongArm app's, etc.
All highly competitive areas where price is a driving factor. And don't get me wrong, revenue growth is important.
But that's also the reason I think revenue will grow much faster than earnings. In fact, I still see margin's declining over that period.
Unlike Microsoft, I think Intel is losing it's monopolistic power. Maybe Xeon, and perhaps Merced can offset the declining CPU ASP's in the near term, but much more is needed for revenue growth.
And if growth comes in competitive areas, what will margins be five years from now?
I was asked if StrongArm wouldn't be comparable to the GE light bulb business. A great revenue generator. But also a low margin business. In fact, if we look at GE, we see a great company with $96 Billion in revenues and $8.6 Billion in earnings. That's a great 9% after tax, by normal standards. And if I were to give Intel a larger net of 14% earnings five years from now, we're looking at $7 Billion in earnings on $50 Billion revenues. Many good companies, including IBM, would kill for 14% net. (IBM had $79 Billion revenues and $6 Billion earnings on 7.5% net for the ttm).
But the problem is, Intel had $7 Billion earnings in 1997!
So the question for long termers is, what are the products that will grow the business to $50 Billion? (Or whatever).
Can't wait to hear what Craig has to say. |
