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Politics : Formerly About Advanced Micro Devices -- Ignore unavailable to you. Want to Upgrade?

To: TGPTNDR who wrote (112126)	5/23/2000 1:55:00 PM
From: Yougang Xiao	Read Replies (4) \| Respond to of 1570977

From Albert: Charles Baucher made negative comments on AMD today: ++++++++++++++++++++++++++ 07:06am EDT 23-May-00 Bear Stearns (Boucher, C/Wu, B 415/772-2953) INTC AMD INTC: Q2 Strengthening On Demand, Supply Improvements Charles F. Boucher 415-772-2953 cboucher@bear.com 05/23/00 Brian Wu 415-772-3028 bwu@bear.com Subject: Company Update Industry: Semiconductors BEAR, STEARNS & CO. INC. EQUITY RESEARCH Intel Corporation* (INTC 118 3/8) - Buy Q2 Strengthening On Demand, Supply Improvements - Raising Estimates, Reiterate Buy Key Points * We believe that Intel's June quarter is improving incrementally based on stronger demand for microprocessors and flash memory, and slight improvements in supply of microprocessors. We are raising estimates slightly for the company and reiterate our Buy rating and $160 12-month price target. * Recent channel checks have shown that total demand for Windows-compatible processors remains very strong, with forecasted demand for the second half of 2000 strengthening substantially. Intel's chief competitor AMD appears to be constrained by chipset availability problems for its Athlon family of processors, providing Intel with an incremental demand windfall. * Intel appears to have gained ground on its supply constraints, with better yields on its 0.18 micron process and a faster ramp of new 0.18 micron capacity. Intel should be able to ship additional units, especially later in the quarter, resulting in sequential unit growth. * We believe Intel is in excellent position to capitalize on stellar demand for microprocessors over the duration of 2000 with an improving mix of products as its high speed Pentium III processors and next-generation Willamette processors ramp shipments. Unit growth should be strong with favorable pricing trends. *** We are raising estimates slightly on Intel to reflect incremental strength in unit demand, and the company's improving ability to meet the demand. We are raising our Q2 EPS estimate from $0.71 to $0.72; our 2000 EPS estimate from $3.05 to $3.10; and our 2001 EPS estimate from $3.50 to $3.60. We reiterate our Buy rating and our $160 12-month target price. INTEL'S Q2 OUTLOOK IMPROVING Recent checks with industry sources reveal that Windows-compatible microprocessor demand has continued to strengthen during the June quarter. We now believe that Intel has experienced additional bookings for the June quarter that provide the company the opportunity to deliver sequential growth in units and revenue, better than the previous guidance of flat sequential revenue performance. Furthermore, we believe that microprocessor requirements for the second half of the year have continued to strengthen, providing the potential for strong sequential growth in Q3 and Q4 off of stronger Q2 sales. We think the demand for microprocessors mirrors demand forecasts for many other devices, which are being driven by strong end market growth and tight supply of components, a potent combination for semiconductor suppliers. AMD SUPPLY CONSTRAINTS A WINDFALL FOR INTEL We believe AMD, a tough competitor for Intel during the first quarter, has run into supply constraints of its own in Q2. As the company attempts to launch two new derivatives of its Athlon microprocessor, Thunderbird for high end applications, and Duron (formerly code named Spitfire) for low end applications, the company has become constrained by the availability of core logic chipsets from its Taiwan suppliers Via, Acer Labs, and SiS. Consequently, we believe AMD is highly unlikely to ship more than its official guidance of 1.8 million Athlon microprocessors in the June quarter, which should provide some incremental opportunity for Intel. At the same time, we think Intel has made better than expected progress in relieving its own supply constraints, achieving higher yields on its 0.18 micron Pentium III production, and ramping total production of 0.18 micron Pentium faster than previously expected. This should enable Intel to capitalize on some of the incremental demand that AMD cannot satisfy, and could enable it to lock up additional supply requirements later in the year. We believe Intel's incremental supply of microprocessors should enable the company to deliver sequential growth in total unit shipments in Q2, with much of the upside coming in the month of June. We further believe that strengthening demand for microprocessors in Q2 bodes extremely well for the second half of the year, when seasonal demand for PCs picks up. STRONGER POSITION FOR SECOND HALF We believe Intel is improving its competitive position to take advantage of strong demand for microprocessors in the second half of 2000 and 2001. The company is shipping a richening mix of Pentium III speed grades and a larger number of total units thanks to continued improvements in its 0.18 micron manufacturing. It is also readying its next generation Willamette 32-bit architecture to ship in the fourth quarter in high end and mid-range retail and corporate desktop PCs, which we believe will result in undisputed performance leadership in the PC microprocessor market again. Recent checks with industry sources lead us to the conclusion that the company is achieving higher than expected functional and speed yields on its Willamette microprocessor, giving Intel the confidence to launch Willamette in both the high end and mid-range desktop PC segments. This will force the Pentium III into the value segment of the market earlier than previously thought, providing a competitive advantage against AMD, which will be challenged to introduce a new microarchitecture equivalent to Willamette in performance in the same time frame. Furthermore, Intel appears to be on schedule to introduce its Itanium 64-bit architecture to the market later in 2000, which we believe will provide a significant psychological positive event for investors. Intel appears to be in excellent competitive shape, having weathered a significant challenge from the Athlon processor without sparking a major price war or sacrificing appreciable market share. RAISING ESTIMATES, REITERATE BUY RATING We are boosting estimates for Intel slightly to reflect the stronger market demand and the company's improved ability to meet this demand. Our new Q2 EPS estimate is raised from $0.71 to $0.72, ignoring the announced charge to account for replacement of defective Pentium III motherboards. We are raising our 2000 EPS estimate from $3.05 to $3.10, and our 2001 EPS estimate from $3.50 to $3.60. We believe Intel is in front of some of the best microprocessor market conditions it has seen in years, and it is beginning to benefit from the aggressive technology development and acquisitions it has made in the server and communications markets over the past few years. We think Intel has become a very attractive stock on the recent correction, and we reiterate our Buy rating. We maintain our $160 12-month target price. Companies Mentioned: Advanced Micro Devices* (AMD)