but as both peaked out in December 1996 and March 1997 (Revenues at $6.4 billion and EPS at $1.10) then slid sideways or eroded until this
recent quarter, (i.e., for two years), it sure hasn't been business results that have driven the share price appreciation over that interval.
Earlie, as you point out, INTC traded in a relatively narrow range from 65 to 100 for two years, until November, when it broke two year resistance, at 100. Yes, the company has doubled from its absolute low, but it has really only risen 35% percent from its long term trading range high.
So why the rise? A very good quarter. Low interest rate environment. Most semi industry watchers are predicting a 2-3 year "up" cycle. An exciting new product cycle with new low end and high end products.
The year just reported wasn't a barn-burner. Profits were down on marginal revenue growth,
Its why the stock did nothing for two years. But as you know, the market looks forward, not back, and it obviously likes the outlook, and is willing to bet that way.
cash is disappearing,
A few strategic acquisitions; CHIPS, SHIVA, and some other private small networker I can't remember, D-Link or Linkys??? And as you pointed out, profits were down. But even with smaller profits, INTC must continue to invest in very expensive fab equipment. I'd suspect that cash position will grow again this year.
DEC pinned their ears back and dumped excess capacity on them
Oh yes, $700M cash, I think, to DEC. Thanks I forgot about that. DEC obviously had at least a decent case against them, that they chose to throw money at to go away.
the Justice boys seem to maintain an interest in their business ethics
This case is largely irrelevant.
the Merced chip somehow slipped through the cracks,
Hardly. Another reason, albeit small, why INTC underperformed for the last two years. But the lack of this chip being ready, is hardly stopping the stampede to x86 based NT servers.
the Celeron chip was both late and an early embarrassment
I agree, but again, this is ancient history now. The current Celeron offering at up to 400Mhz with on chip cache is a VERY competitive low end offering going forward. In fact, it seems Celeron and derivatives will completely replace PII very soon, with PIII staking out the high end.
Rambus is causing problems
Not sure what you mean here. There is no chipset that supports Rambus yet. Its likely though that INTC will have the first.
AMD has eaten Intel's lunch and grabbed a big piece of INTC's market share in less than a year
The latest Microprocessor Report indicates that AMD grabbed very large low end market share which peaked in Sept/Oct. But this trend immediately began reversing with the intro of the Celereon with cache, and will likely continue to reverse as INTC becomes more determined to gain back this share.
price wars are commencing
They are here and have been for a year. AMD seems to be suffering much more than INTC. IMO, this has a lot to do with INTC far superior manufacturing prowess. Their ability to ramp yields on new processes is unmatched by any company.
cash is disappearing
Covered this above.
and their main end product market is flattening out.
This statement has no basis in fact. The PC market continues to grow at a healthy clip, as evidenced by continued strong performance from CPQ, IBM, and DELL.
Now should we pay $135 for this? Only if a case can be made for stunning growth in 1999.
I don't think INC needs stunning growth, just consistent growth going forward. I'm betting they get it. If they don't get it, it will back to that old trading range in a heartbeat.
Now let's see. Business spending for PC's is falling off rather rapidly,
This is not what IBM, CPQ and DELL are telling us, and they are the BIG 3 in this market segment.
and some observers like Earlie see an inventory overhang much larger than last year's
Again, I see absolutely no reason to believe this. DELL has never had inventory problems. CPQ seems to have solved theirs, and so has IBM.
(which caused beaucoup problems as I am sure you are aware,... remember CPQ's single penny of profit last year in Q1 when the N.Y.cheerleaders were expecting $0.35?).
Yes, we all remember CPQ at 22 when they had these problems. I bought in at 28 and 31. CPQ tells us they don't have these problems any more. Should we not believe them?
Even INTC management doesn't sound enthusiastic about Q1, but of course things will pick up thereafter. Sure it will, especially as one country after another peels off the list of prospective buyers of anything other than essentials.
Did you listen to the CC? I would say they sounded cautiously optimistic about 1999. They sounded very focused. Interesting that no downgrades came out of that call. Even Kurlak has gone to the darkside (from your viewpoint) <g>.
Situations like this are grist for a short's mill, so long as patience is applied. Thank goodness for those enthusiastic momentum boys who create these nice opportunities.
Be careful, and I wish you the best of luck.
Gary |
