Mao2: You asked my opinion on the view that Intel may warn and cause market chaos, especially for CPQ.
We know that PC sales grew in the first 6 weeks 1999. This means that Intel's market grew.
Some may argue that at least half of those PC sales were from inventory and carried Intel chips bought and paid for in the 4th quarter, 1998. So what do PC sales look like after the first six weeks? As of Friday last, the following reported that PC sales were normal or strong in the second half of February and going into March. DELL,CPQ,HWP,GTW and, I think, IBM. Most analysts and most boxmakers expect that business clients seeking YK2 compliant machines will also boost demand going forward. So this is good for Intel.
Is this too rosy a picture of the start to the year? Intel, itself, reported that sales in January exceeded expectations.
Then why all the fuss and fear? I don't know. It may be confusion over two issues.
1. Although PC sales have grown judged by the number of units sold, the revenues from those sales has not grown as fast. Why? Because average selling prices (ASP) have been falling due to competition and due to the need to clear old inventory at a discount before new models containing Intel's Pentium III hit the market. Pentium III was available as of last Friday. This is all a concern about the rate of growth. The growth of PC units versus the growth of PC revenues. But this does not affect Intel. It's revenues are tied to the number of PC units sold - it provides components for each unit sold.
2. AMD is reputed to be taking market share from Intel in some portion of the market. If Intel deals with this as it usually has it will crush AMD, using its pricng power. Will this affect Intel to such an extent that it will have to lower the Street's expectations. I don't think so, because the competition with AMD is mainly in only 20% of the market served by Intel. But even if this was to cause Intel to shave its expectations, this would not affect boxmakers. This would be a pure AMD/INTEL conflict. Would any kind of negative announcment from Intel affect technology shares? Of course. But not for long. The fundamentals are there and if Intel gets into a price war with AMD this means that Intel components will be cheaper for boxmakers to buy in certain PC configurations.
If you are going to be spooked by happenings a year ago, then you are going to be spooked. Fundamental analysis tells me that CPQ will be $50 within a reasonable time and $65-75 later this year. I concede that any number of statements or happenings or moods or fears might push the market down further and with it CPQ's price, so all one can do to deal with such irrational forces is to devise a strategy to profit from them. Some of my very best investments in the past were those that I kept buying as the price fell out of convinction for the fundamentals. |
