Always Crying Wolff - Re: "Yes Intel has squandered its Microprocessor lead, do you care to discuss? "
Why don't you discuss this:
{=======================================}
To: Paul Engel (95870 )
From: Wolff Thursday, Jan 13 2000 6:25AM ET
Reply # of 96891
Here are my thoughts on Intel into earnings and INTC as a whole for the new year.
Disclaimer: This is 100% gut instinct
News of the future:
Okay here is the scenario: Thursday the market floats around without too much direction, CNBC talks of the sector rotation out of Internets into Semiconductor stock. Intel goes up a few bucks in the very AM, comes back off, and ends the day about where it started out. At the end of the day INTC announces earnings. Within the Thursday market day, Greenspan shakes up the Market in a profound way, the realization that bonds are more attractive and interest rates are going up is returned to focus. This amazingly stuns the short-term memory lapsed market. (Remember when IBM announced warnings, and then it went up, then IBM said it again, and it tanked again, that is the exact same thing for the current market.) Intel makes into earnings at pretty much its current price levels.
I believe that Intel will barely perform to expectations at best, and will need to coach new expectations for profits and margins going forward, in the conference call (see below for my in-depth INTC analysis). The conference call will be a surprise, and coming out of it, there becomes strong selling pressure on INTC in the aftermarket. Everyone was geared up for Intel to have a super Quarter. The aftermarket is becomes the hottest since LU trading. (Note this is the first “everybody plays” aftermarket for Intel, its effects were seen in Lucent, it is a new factor that is currently unaddressed by commentators.) INTC drops 8 points in the after market. Bearish analysts trumped by the bullish pre-announced analysts, toss in some Holds and Market Outperforms, with the satisfaction of nailing the early talking analysts.
A stunned and fragile market opens to a massive INTC selloff on Friday, the volume will exceed the recent high of LU. I expect 100M plus. CNBC goes into INTC day 1 mode, similar to AOL day 1 mode. Maria is on the floor screaming that “INTC is going to open down” The entire semiconductor sector is whacked. The rotation form Internets to Semi sees investors with harsh hits, without them scampering back into the Internets. Cash gets parked by some. The Nasdaq looses 300+ points in the most nasty selling seen since the first Tuesday of 2000. Its carnage time.
People stew on the news and information overflow throughout the weekend. “The Tulips Burst the Bubble..Market Topped?” Headlines are everywhere. Everyone is panicked on Monday, and many corporate Daytraders call in sick to watch there accounts full time. Will there be relief? No. The interest rates keep the institutions off on the sidelines and the selling pressures of the individuals are not buoyed by support. The market corrects 15% on Monday, same deal with an additional 7% decline on Tuesday. Combined with Friday the Nasdaq corrects nearly 25%. The Dow declines a modest 10%.
The hemorrhage stops on Wednesday, but the money flow coming back in is slow, for the next two weeks, in week three all is happy again, and its off to the races.
See below for INTC analysis, this is just my gut feeling, I could be truly off base here, but I have been thinking this everyday since Saturday. So I had to write it down. Lets hope this turns into a exercise in creative writing. We shall see.
Wolffie the Greek
Intel Analysis
Considering these factors:
1. Missed shipments to Gateway, and others.
2. Intel's own problems with Chipsets
3. The effects of the PC100 and RAM price spike, in the beginning of the quarter
4. The Rambus memory issues and delays
5. The Y2K costs and preparedness (IBMs warnings should translate)
6. The factory line shut down at Dell because of new Pentium flaws and the resulting engineer response to verify a second source for both Desktop and Server solutions. (believed to be widespread, “we need a second source, we can not only buy from 1 supplier”
7. AMD Athlon (K7), and acceptance of K6-2 and K6-3 as a great low cost part.
8. The continued shift of graphics power to graphics co-processor Nvida and 3dfx and away from CPU speed.
9. The high costs of INTC rapid acquisitions of non-core competency companies without cost saving of centralized functions such as accounting and other overhead functions.
10. Poor planning resulting in building of the wrong CPU product mix.
11. The year+ delay in Merced (P7) to replace its aged Pentium P6 core
12. Dart throwing stock analysts who have no clue to industry (still)
The Celeron product line will be selling well the margins are much lower on the low end. Additionally the AMD shipments have been high volume, and with little problems. The server market was numb in the last quarter, which are the high margin side, earnings will be a relative to Intel, a dud.
Other conference call factors: Like Intel failed ventures into graphics cards, and modems, and DSPs the simple attempt to enter into Networking space will find Intel militaristic culture at sharp odds with established networking core. Intel has lost it Microprocessor lead to AMD who is putting out a better processor (Athlon) at the same speeds as Intel, the higher margin high speed market is for the first time in Intels history under attack. The K7 was built by a design team well familiar with high MHZ speeds, the DEC Alpha crew, unlike the K6 and already evidenced the K7 will ramp in MHZ and its current .18 Micron process. The .10 Micron conversion will also continue to keep speeds up. Lastly AMD will create its own Celeron model with a non Slot 1 socketable Athlon without the Card package and exterior Ram.
--All these above factors and more will create an Intel that while still a high profit company will be on an ever decreasing scale, while its cash cow, is moved to commodity. The orginal IBM contract gave Intel the microprocessor business, and while successful in that, near every other business they have been a week also ran in, not how they came up with the Flash RAM, but have been so week in it that it barely holds the market and is not profitable in what it does hold.
Intel will have done the impossible, out thought and analyzed the Microprocessor Market, and screwed up its crown jewels. The one task was not to screw up the CPU market, and now its done, with AMD ahead in all but Manufacturing capacity.
Threats of the Internet finally hit Intel in mid 2000. The two killer apps for all micro processors in the new century are the Internet and 3D games. Sega will enable Internet gaming on a $199 device that is far easier for developers to build quality games on (the Sega Dreamcast already has the 56K modem inside it). The common platform specifications give game developers a serious leg up on PC games. The new Playstation will also have Internet capabilities, as will the Nintendo and IBM Dolphin machine both the machines are expected to have 2-3 times the power of the Sega machine which current is superior to 90% of existing PCs. Only one thing missing from this picture--- the VGA out signal. Combine these game machines with Internet access a VGA out to hook up to a 299 19 inch monitor, add the parallel port for printing, and Java web based application over the Internet, and a USB for the DSL modem hookup and you got a cheap computer that is not Intel architecture based, and does not use Microsoft OS either that runs the two Killer applications far better than the current WINTEL system and provides. With a 2-3 life cycle developers love the ease of programming for a know and common hardware structure. I could go on but you see the threat. Think I am nuts, Microsoft has its X-box game machine in development now. Expect to see the same success as Window CE for the Palm category. The current set of analysts of Intel are so coached it really is pathetic.
ONE SENTENCE SUMMARY: As Harddrive margins died and profits declined as a percentage of the total price of a PC's total sales price….so goes the CPU…Hardrives are near the same tech as a CPU...Hardrives are commoditys to PC builders and soon so shall the CPU.
This future brought to you by
Wolffie the Greek
{=====================================================}
Paul
|
