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Technology Stocks : Intel Corporation (INTC) -- Ignore unavailable to you. Want to Upgrade?

To: Jim McMannis who wrote (90083)	10/13/1999 12:24:00 AM
From: puborectalis	Read Replies (1) \| Respond to of 186894

Technology Still Holds Promise, Part 3 by Pat Dorsey and Scott Cooley \| It is hard to imagine how things could be better for funds in the specialty-technology group. Literally dozens of dynamic, innovative technology companies have posted stunning sales and stock-market gains in recent years. Indeed, over the past five years, the average tech fund has topped the S&P 500 index by more than five percentage points annually. Tech stocks have registered sizzling gains in 1999, too, even proving resilient in the third-quarter market downturn. Has the big money in tech investing already been made? Maybe. But several prominent managers say that selected names in the tech arena still hold considerable promise. We sat down with Warren Lammert of Janus Mercury JAMRX, John Leo of Northern Technology NTCHX, and Chip Morris of T. Rowe Price Science and Technology PRSCX, and asked them what areas of technology look attractive to them. What follows is the final installment of that discussion. Click here for part one and here for part two. Any other thoughts about Intel? INTC Chip Morris: I think Intel realizes that the PC industry is going to have 10% to 12% unit growth and probably less growth in revenues over time. Intel will probably get a reprieve in calendar 2000 because of the introduction of NT/2000, since an operating-system cycle for Microsoft usually means a richer mix of processors sold by Intel for about 12 to 18 months. And I agree, the acquisitions they made in the communications space are basically Intel telling the world that their core desktop-PC market is running out of gas. And as John said about Microsoft, Intel is going to be less advantaged in a world in which the desktop doesn't dominate information technology spending. And so Intel is thrashing around figuring what else they can do and the communication market is the natural, adjacent market for them. Warren Lammert: Intel is a company with tremendous manufacturing expertise and a great culture, and they have once before changed their skin by moving from the memory [chip] marketplace to really inventing the microprocessor. The move into communication is a different story. The fact is, by doing by acquisition they don't really have any important new intellectual or product contributions to make. I think it is a real concern whenever a company signals, by moving to a new market, that their basic business has hit a wall or at least reached maturity. I think it is also right that there probably is an attractive cycle in front of us over the next 18 months in Intel, mostly sparked by the NT/2000 upgrade cycle, as well as strong PC unit growth, thanks to the e-commerce. But I think the PC will lose importance within the broader electronics industry moving forward. John, my impression of your thoughts on Intel was that it was a good place for the longer term, not just a good cyclical play. Is that correct? John Leo: Well, I'll modify your impression just a little bit. We certainly won't let Intel off a reasonably short leash in terms of our evaluation of what they're doing. I guess I do expect a pretty good year out of them from a business-momentum standpoint--referring to the NT/2000 introduction that Chip pointed out. I think that they're probably going to be able to show some good gross margin momentum over the next few quarters, with server-based higher-end processors leading the way. Northern Technology NTCHX: Performance and Risk Analysis Star Rating Category Speciality-Technology Return High Risk Below Average Net Assets $537 million Expense Ratio 1.23% Sales Fee None Initial Invest $2,500 Trailing Total Ret % +/- S&P 500 % Rank Cat YTD 49.22 40.98 46 12 mo 163.74 124.58 35 3 Year 49.26 23.49 6 But there is an important transition the company will have to navigate over the next two to five years, and our investment horizon--our positive outlook for the company--is probably 12 to 18 months at this point. What are your thoughts on hardware companies like Cisco, EMC, and Sun Microsystems? CSCO, EMC, and SUNW Lammert: I own both Sun and EMC, but the largest hardware position I have is Nokia NOK. I think it is an extremely attractive play, both of because the ongoing growth of the voice market within cellular and now with the addition of a large wireless-data market. This makes the devices more complex--which is probably better for margins--and it means you have a huge upgrade cycle in front of us, one in which Nokia's strengths in product design will again really come to the fore. Chip, did you have any thoughts on Nokia? I see that you've got that as a fairly decent size position in the most recent portfolio we have. Morris: Nokia is the horse to beat. It is very interesting because Nokia now does two times the volume of Motorola MOT or Ericsson ERICY. Since everyone buys the same parts, the economies-of-scale advantage that Nokia has is potentially developing along the lines of what Dell DELL has vis-à-vis Compaq CPQ, Hewlett-Packard HWP, and IBM IBM with respect to PC manufacturing. Unless Nokia stumbles hard, Ericsson and Motorola will never be as profitable as Nokia can be in the same business.