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

To: Bipin Prasad who wrote (110783)	9/22/2000 1:06:43 PM
From: Sam Citron	Respond to of 186894

Exclusive Interview: Ashok Kumar on Intel By CNBC.com Staff Sep 22 2000 8:50AM ET Piper Jaffray stock analyst Ashok Kumar appeared on CNBC TV's Squawk Box Friday, to discuss the latest on Intel. Kumar was one of the few analysts to peg Intel's earnings warning -- and one of the most sought-after experts on Intel in the wake of the Intel warning. Interviewing Kumar were Mark Haines, David Faber and Martha MacCallum of CNBC TV, and Squawk Box guest host Robert Balentine, of Belntine and Co. Interview Transcript Haines: First of all, congratulations on getting this one right. Kumar: Thank you. Haines: This is not first time you have done [it]. Is Intel now losing market share to competitors? Kumar: Absolutely not. Right now, our opinion has come down to 2 percent or 3 percent unit growth for Intel - this is worldwide slow down phenomenon [for the PC sector]. It is not a market share loss issue. I mean today supply is only 3 to 4 million units a quarter. And Intel's run rate is closer to 35 million unit a quarter. This is not a case of market share loss by any stretch of imagination. Haines: Okay. There is answer to the question Martha MacCallum and I were discussing. If I recall you, the last time we talked to you just a few weeks ago, you warned before the company did that this would happen. You said longer term I still like the company that's why I am keeping buy on it. Do you feel the same way still? Kumar: Yes I do, I think it is very well-positioned at the high end of the market. If and when they execute and we hope that will second half of next year. But meanwhile, I think we are faced with multiple issues. One is significant … if you factor in production in the September quarter, the supply is 2% and the demand is just not there to absorb that kind of supply. The pricing environment will turn very malignant and then factor in transition next year, which will have a direct impact on manufacturing cost because they cost substantially more to manufacture. Faber: Was this worse than you had expected, when you said things might not be as good as much of street expected? Kumar: Not quite. I think we said if business did not pick up, there could be risk to our numbers, which in fact is what happened. Faber: Are you tempted perhaps to even consider upgrading shares of Intel while all of your competitors are doing the opposite? Kumar: Yes. I think for one, we didn't downgrade at the peak at $75. And at some point I think we had to step in but I would like to have fundamental support when I make that rating change. Faber: What about the PC makers as well? Dell certainly was very weak yesterday. You know PCs are still the key area and that Intel sales aren't into the communications market like many other chipmakers. Is this bad sign for the PC sector? Kumar: Definitely, on a short-term basis, all of the PC vendors without exception will be impacted. I think Intel also is trying transition away to being infrastructure vendor longer term. But that's the slow impact, because today's numbers represent only 5% of the unit mix for the company. Balentine: Two questions: first, related to Intel, what affect do you think that the euro and weakness in the euro is likely have on earnings? And what impact do you think the fair disclosure rule is going to have on analyst as yourself, when it is implemented the 18th of October. Kumar: I think the euro is down 15% year to date. And of course, all of these microprocessors are priced in dollars. Europe today represents about 25% of worldwide PC demand. But if you look at the first two quarters, Europe was up 25 to 28% year on the year, in terms of PC growth rate, and that dropped about 5%. So I don't think Europe or currency is primary factor behind that. It is just basically drop off in demand. Balentine: How about fair disclosure rule? Kumar: Well I think it goes back to doing fundamental research and when you have to stick your neck out, you require more due diligence and I think that seems to be exception in the world right now. MacCallum: You hit on this just a little bit a moment ago. But it seemed when Intel came out with their July numbers, they said they were pretty much sold out through the end of the year. So what exactly changed? Do you think contracts were cancelled in Europe because of drop in demand because of the euro? Kumar: I think a lot of light has been shining on Europe. To put it in perspective, you look at non-Japan Asia Pacific as almost 30% of worldwide demand. Growth rates dropped there from 60% year on year in the first quarter half to less than 30%. In North America, which is about 30% of worldwide demand, it went from 30% to 10% and Europe of course dropped to 5% growth in q3. There is a worldwide phenomenon, to just answer your question specifically -- the demand profile was very strong at the front end of quarter, then fell off the cliff towards the back end. Faber: And this morning, Intel is being downgraded by many of your competitors. I have seen at least three. What do you think Advanced Micro [Devices] right here? Kumar: I think Intel today has traditionally had 58% market share with 15 to 16% going to AMD, and now given supply, Intel has product on hand to supply 120% of the market requirement. Haines: We will leave it here. There thank you very much. cnbc.com