Richard:
You addressed your note to MB, and like you, I look forward to his comments. I'm on road for the day so here's a short early morning comment to get the topic moving.
Intel is a stock market icon, hence it is a "core holding" for most investors. Unfortunately, the problems are significant.
- A "one trick only" (micros) pony.
- Earnings are in a multi quarter slide, margins are under pressure.
- PC sales growth at consumer level has been in decline for two years
- PC sales to business has dived off the graph in the last two months. (surprisingly broad variety of reasons).
- Figure on "very weak at best" unit growth this year in world-wide PC sales (85 million units), and "flat at best" in 1999.... AMD alone will produce 12.0 million micros in next 12 months. A year ago it was nil. I wonder who's losing market share?
- No longer a monopoly,....competitors both tough and numerous.
- Pricing of micros is in a continuous slide,...steeper than cost reduction.
- No new applications (to drive PC sales) in sight
- Business model is broken,...can't chase buyers "up market" through production cuts at bottom end.
- Cash is disappearing.
- High fixed cost and significant excess capacity,....the easy cost cutting is in the past.
MSFT seriously over-valued, but it's still a monopoly. Can't see shorting/putting it while so many other superb targets are available. On the other hand, INTC looks ripe to this observer. I expect the coming earnings release will not stir any new enthusiasm (i.e. mediocre), but to be coupled with a nasty warning about what's coming up.
Best, Earlie
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