MM:
Whether the company warns or not, INTC is going to bleed during the next 2 quarters. Even slick accounting will be hard pressed to mask the kind of problems INTC is experiencing.
Last quarter, Intel simply produced too many chips (say 30.0 million) and sold too few (say 25.0 million). Of those they sold, a bunch did not flush through to actual end purchasers of PCs, so the old toilet bowl has a big tennis ball in place. Nasty black bears love blocked toilet bowls, especially when the market doesn't see the fast-rising water (and other) levels. (g)
We think a maximum of 85-87 million PC units could be sold this year (1999), so let's be nice and round it upward to 90 million (1998 will end up at 88 to 89 million). Now let's see,...INTC can produce 30 plus million micros per quarter without straining, and AMD is rattling along at 5.0 million per quarter. Don't even bother adding in Cyrix, et al. A bit of excess production capacity you say? Oh my.
Now let's plug in the fact that much of Q1, 1999 has been devoted to working the old plunger to force that tennis ball down the pipe. It's been a SLOOOOOW quarter for PC sales, so reckon on "reduced" (or worse) shipments from INTC for this quarter, and much of what does get shipped as merely a clearing of the lights in the warehouses of PREVIOUSLY (Q4) PRODUCED micros. Yuk!
Few situations produce more pain than excess manufacturing capacity during a downturn. Additionally, the need to regain lost market share from AMD has caused greater price cuts than anyone in Intel expected. There is no way on God's little green planet that INTC can maintain its revenues or its margins, given the above nasty situation.
Warn or not, the "church" has taken a missile through the main entrance this quarter. Lambs ensconced therein will take some serious flack.
Best, Earlie
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