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Technology Stocks : Intel Corporation (INTC)

INTC 36.91

-1.1%

Dec 31 3:59 PM EST

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To: Brian Malloy who wrote (13600)	3/9/1997 2:42:00 PM
From: AK2004	of 186894

Brian thank you, finally someone is posting real arguments. Let me try to address them: 1. In a world where demand is growing at a rate faster than supply you do not necessarily loose market share. Your market share can stay the same and you will still make money, in fact one could even loose some market share and still make more money. That is true in many cases but not this one. Intel's current profit margins are monopoly profit margins. Current market expectations (I think they changing right now) is that intel will maintain its monopoly status. If that is to change then intel stock prices will go down even if the revenue would continue to go up. 2. AMD has two chip plants. They have not announced plans to build any more. INTEL has at least three new plants under construction and more on the way. Therefore, AMDs capacity is fixed. Intel's capacity is expanding. Amd is building a plant in germany but it will not be ready until end of 98. Without that plant the estimate capacity of amd is upto 30M k6 per yer. The expected demand for 98 is below 80m(if I remember it correctly). 30m chips is a good chunk of 80m even without plant in Germany. You have to also keep in mind that ibm is likely to expend their production of cyrx chips. 3. AMD with the introduction of its new chip if it ships on time and there are no problems with the chip will cause earnings to rise at AMD. However, INTEL will sell more chips as it contiues to bring new fabs on line so it will earn more as well. That is most definitly true for the 1st half of 97 but after that the total capacity of intel and amd would be higher than market demand and intel would have to cut down on their production. 4. However, because INTEL is increasing chip production at a much faster rate than AMD ever will, INTEL is the company that is and will continue to gain market share. I think that was already addressed in 3) that is you are ignoring market demand. 5. Given a choice, the corporation that can increase revenue while increasing production and gain market share (INTEL) is in a much stronger position than a company (like AMD) which can increase revenue while production levels remain relatively constant and looses market share. The company with the dominant strategy wins. INTEL has the dominant strategy. I think that was also answered above but I will repeat it. You can not ignore 30M chips and plus to that by the end of 98 the German fab is going to be online. Intel can not gaing much of a market share since they already have 90% of it and with cyrx and amd they can potentially loose 50% of market share by the end of this year. Amd needs only 10% of market share to justify it current growth in stock prices. Intel needs not only to maintain its current market share in order to justify the current valuation but also to maintain the monopoly status and margins.

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