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Technology Stocks : Gateway (GTW)

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To: Skeeter Bug who wrote (6972)	1/9/1999 5:14:00 PM
From: Fred Fahmy	Read Replies (1) of 8002

<intel's outlook now isn't much different than it was back in 1996, imho. remember, the outlook back then was pretty good, too - even though it was wrong.> No, it wasn't wrong. You are confusing a weak first half of 1998 with 1997. In 1996 the outlook was good and in 1997 Intel performed extremely well posting EPS growth of 34% over 1996. The problem (if you want to call it that) didn't start until the very end of 1997 and lasted about 3 quarters. Actually, the "problem" was more related to a major product transition and macro economics more than anything. Intel has seen brief periods like what happened at the end of 97/star of 98 before and I'm sure they will again at some point. Shouldn't be soon though, probably not before Merced starts its ramp-up. Re: Margins Margins have increased for 3 straight quarters and are above Intel's long term target/goal/guidance of 50%. It has nothing to do with Christmas. It has to do with product mix and cost improvements as PII matures. Margins at the end of 1996 and first part of 1997 were artificially high (for a number of reasons) and the company continued to tell the investment community that it saw margins returning back to the normal level. Well they did, no more no less....but now they are heading back above historical levels. Intel has always insisted that they want to maintain margins around 50%. When margins get higher (like now) it's a bonus. Their stated strategy in all of their annual reports is to grow margin dollars not margin percentage. I think you would agree that sustained margins in the low 50% range (which Intel has been able to produce for years) is adequate provided they continue to grow revenue sufficiently. BTW, for the record Q1 1997 was the record EPS quarter (1.10) which beat the previous record set in Q4 1996 (1.06). I suspect that you will see the same trend this year, i.e. Q1 99 will be even better then Q4 98. I could be wrong....it's happened before ;) Good luck, FF P.S. You have referred several times to the fact that GTW has indicated that sales are not going as well as expected. Are you speaking about Q4 and if so when did they give such an indication?

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