Yousef: re <Intel will continue to keep AMD "segemented">
This is at the core of the disagreement that I have with those who espouse Intel's permanent inevitable complete domination (note that I have no problem acknowledging Intel's past or present dominance). I believe that your statement left out the phrase (right after 'continue') "...to do everything within its power..."
Unfortunately for Intel, everything within its power is not equivalent to a done deal. It is certainly a most impressive company, staffed by a tremendous number of exquisitely bright and hard-working people. But these talented folks are not just contending with AMD, they are also fighting some aspects of business that I believe are inexorable - the combination of the inherent difficulties of maintaining high growth rates and margins as organizations become enormous and the problems caused by being the hunted instead of the hunter. Given their smarts, they appear likely to continue to wrestle with the latter problem in good fashion, and they have certainly acquitted themselves well in this regard to date (other than the four-segment approach, which I continue to believe will been seen as a blunder and not as a viable attempt to keep AMD pinned down in an unprofitable segment).
But the other issue - attempting to maintain high growth and margin rates in the face of really big numbers - is really, really difficult. The recent $20 pullback in the share price for Intel might be a reflection of seasonality or it might be an acknowledgement of the viability of the AMD challenge. However, I think that in retrospect, the market will decide that the pullback was the market's recognition that some of the exuberant price targets out there for INTC simply didn't make sense in light of the likely EPS growth rates that can be reasonably expected over the next several years. And the willingness of INTC management to pay substantial premia over market value for other companies should, I believe, be interpreted as a sign of their recognition of precisely this problem, because the existing product portfolio simply doesn't have the legs to get Intel to the earnings growth rates that a much higher stock price would mandate.
What makes this interesting is that the scope of the pullback (INTC closed last night at its lowest level since early November) is such that we're not that far from a point where even this observer believes the stock to have some attraction. So as Intel fans on this thread have been focused on AMD's shortcomings, they have (if they have been long) suffered some pretty severe relative underperformance of the stock they have favored. And the question at this point should be which of the two stocks (AMD and INTC) that have both been pretty dismal so far this year offer the greater likelihood of outperformance over the next 6-12 months? I would think that AMD goes to $36 before INTC goes to $100, despite many of the valid points that you have made on this thread. - Tad LaFountain |
