Again, Courtsey of Albert:
06:50am EST 16-Nov-99 Credit Suisse First Boston (Glavin, Charles (415) 836-77
AM CALL: INTC: Introduces 820 Quietly (PT 1 OF 2) FBC
CREDIT SUISSE FIRST BOSTON CORPORATION
Equity Research Americas
U.S./Technology/Semiconductors
Charlie Glavin 1-415-836-7715 charlie.glavin@csfb.com
Maria L. Vallejo 1-415-836-7763 maria.vallejo@csfb.com
Regina Crilly 1-415-836-7767 regina.crilly@csfb.com
BUY
LARGE CAP
USD 74.06
Intel Corporation (INTC)
Intel quietly/finally introduces 820 chipset. No rapid ramp of Rambus
expected.
Summary
Intel quietly introduces 820 chipset that supports Rambus DRAM and 4x AGP.
Given the timing of the introduction, we view the new role of 820 as more of
a sponge to soak up existing RDRAM rather than a driver.
Chipsets to support DDR (Amador, due January 2000) and integrated PC-133
(Solano, due next April) are likely to regulate Rambus only to high end PCs.
As we've been saying since early Spring, Intel's tagline is: Whatever type
of memory the PC OEMs want, that's what Intel will support. With the various
contingencies, no constraints to microprocessor sales expected. No change to
our model or outlook.
Price Target Mkt.Value 52-Week
11/15/991 (12mo.) Div. Yield (MM) Price Range
USD 74.06 $100 0.12 0.2% $257,136.3 $89.50-37.91
Annual Prev. Abs. Rel. EV/ EBITDA/
EPS EPS P/E P/E EBITDA Share
12/00E $2.55 29.0X 114%
12/99E $2.23 33.2 119%
12/98A $1.77 41.8 132%
March June Sept. Dec. FY End
2000E 0.58 0.60 0.65 0.72 Dec.
1999E 0.57A 0.51A 0.55A 0.60
1998A 0.41 0.33 0.44 0.59
ROIC (12/98) NA
Total Debt (9/99) $884
Book Value/Share (9/99) $8.40
WACC (12/98) NA
Debt/Total Capital (9/99) 2.9%
Common Shares 3,472
EP Trend2 NA
Est. 5-Yr EPS Growth 15%
Est. 5-Yr. Div. Growth 10%
1On 11/15/99 DJIA closed at 10,760.8 and S&P 500 at $1394.40.
2Economic profit trend.
Intel is the world's largest semiconductor company and the largest supplier
of microprocessors (CPUs) with an estimated 80% unit share of the PC
processor market. The company is also the largest supplier of Flash memory
and PC chipsets and a leading supplier of low-end networking solutions.
Intel quietly introduces 820, no fanfare at Comdex.
Intel quietly issued a press release introducing that the twice-delayed 820
chipset (formerly known as Camino). The 820 was released without much fanfare
, with information available primarily through the Website and wire services,
despite it being the first day of Comdex, normally a day of very vocal
product announcements. In addition to the 820, Intel also introduced the two
related motherboards we alluded to last month: the CapeCod820 (CC820) and the
Vancouver820 (VC820) - only the Vancouver supports Rambus. We estimate that
the Vancouver (including the chipset) costs about $155. Prior to today's
announcement, Intel only had its 840/Carmel chipset and the Oregon840
motherboard ready for RDRAM support. Unfortunately, the Oregon board costs
roughly $260, with the 840 chipset around $60 - leaving the 840 officially
focused on the high-end market, not the mainstream PC market, even those systems
above $2000.
The key significance of the 820 announcement is that Intel now has a chipset
that supports both Rambus DRAM and 4x AGP graphics. However, actual systems
that incorporate the 820 are only expected over the next 30 days, which makes
it too late to be a significant force in the Christmas season. Again, this is
as we expected, so we do not plan any adjustments to our model.
Intel roadmap shows diminished role of RDRAM
While this may seem to signal full-support for Rambus proliferation, the rest
of the Intel chipset roadmap would argue that Rambus is not going to be as
pervasive as once thought, and should mainly populate the high end PC /
workstation segments. As such, we believe Rambus is more likely to be
supported by 25-35% of the total market over the next two years, not the
majority of it.
Consequently, it appears that the near-term role of the 820 is to act like a
sponge soaking up existing RDRAM memory in the market. Samsung, Toshiba, and
NEC all stopped producing RDRAM chips in October, with only Samsung and maybe
Toshiba appearing to have restarted limited production two weeks ago.
Yet Intel still has plenty of contingencies, that in most cases produce a
much better price/performance for the intended market than had Rambus been
forced into them. Actually, we believe that Intel never fully intended for
Rambus to be as widespread as some investors believed. Support work for non-
Rambus chipsets had been talked about as long ago as Intel's Developer Forum
back in April 1998. Intel's goal has been threefold:
To motivate the memory makers to improve R&D spending for higher speed memory
(hence why Intel supported a relatively obscure architecture like Rambus ---
to light a fire under the entire group).
To make sure that memory speed would not be a bottleneck to processor
performance.
To have enough memory alternatives (Rambus, DDR, PC-133) to support its
different processors (Pentium-II, Xeon, Celeron, respectively).
Since the beginning of 1999, we have said that we believe the ultimate
tagline for Intel's memory strategy is, "whatever memory type OEMs want,
that's what Intel will support". Rambus just happens to be one type of memory
that is better-suited from a price/performance standpoint for the higher end
Performance PC and workstation systems. For the value/sub-$1000 segment, we
believe Intel will advocate using PC-133 SDRAM (given the better
manufacturing costs), and the use of DDR for servers as well as the new 64-bit
Itanium line.
Look for Amador and Solano chipset in 1H00 to support DDR and PC-133.
In keeping with its tagline, we believe that Intel will introduce its 815 (
also known as Solano) in April to support PC-133 SDRAM. (Note: We apologize
that we had been spelling Solano phonetically as Celano earlier). Currently,
users can still get PC-133 SDRAM support with a Memory Transfer Hub (MTH)
chip - an external ASIC. With Solano, that PC-133 support will be integrated
right on the chipset, improving cost and performance.
For DDR, we expect Intel to introduce a chipset called Amador in January 2000.
DDR doubles the current 133-MHz bus to 266-MHz, opening up support for high-
speed servers and it should serve as a platform for Intel's new Itanium line
late next year. Generally, it is preferred if the clock speed does not exceed
the bus speed by more than a 5:1 ratio. Without the double-rate, and the
problems with Rambus, DDR gives Intel plenty of headroom for the next several
years.
Other tidbits that reinforce our notion that Intel is backing away from full
RDRAM support: on the same day that Intel unveiled Coppermine, the Rambus
engineer at Intel responsible for physical interfaces quit. Meanwhile, Micron,
HP, Compaq, and Gateway are all using Via's Apollo chip instead of the 820.
AMD also plans to have its own DDR-266MHz product by year-end. Unless Intel
openly supports a variety of alternatives, we believe Intel could have boxed
itself into a corner while giving its competitors some unnecessary market
opportunities. With its current roadmap, we believe Intel now has the bases
covered.
06:50am EST 16-Nov-99 Credit Suisse First Boston (Glavin, Charles (415) 836-77
AM CALL: INTC: Introduces 820 Quietly (PT 2 OF 2) FBC
CREDIT SUISSE FIRST BOSTON CORPORATION
Equity Research Americas
U.S./Technology/Semiconductors
Charlie Glavin 1-415-836-7715 charlie.glavin@csfb.com
Maria L. Vallejo 1-415-836-7763 maria.vallejo@csfb.com
Regina Crilly 1-415-836-7767 regina.crilly@csfb.com
BUY
LARGE CAP
USD 74.06
Intel Corporation (INTC)
No change to estimates or outlook.
As today's announcement had been expected, and we believe that the remaining
gaps in Intel's chipset memory products have been filled, we are not changing
our earnings estimates. The timing and breadth of the 820 introduction should
have no material change to Intel's 4Q99 results. Instead, we continue to look
at the forthcoming upgrade cycle in 2000 to be the key driver for Intel:
beginning with the roll-out of the Windows 2000 platform shipment in 1Q00,
but also including a major boost from the 600-MHz and higher mobile
Coppermine processors and higher speed desktop processors from the Wilamette
line.
We maintain our EPS estimates of $0.55 for 4Q99 and $2.55 for 2000. We rate
Intel a Buy with a $100 price target. |
