INTC--ARTICLE--The people v. Intel
September 27, 2000 12:00 AM PT
by Ali Asadullah
Editor's Note: Every Monday, Ali Asadullah will put someone new on the stand for various crimes related to tech business. Then it's up to you, the reader, to debate the case on our discussion boards. On Friday, Judge Asadullah will issue his verdict, and, of course, the proper punishment.
The defendant: Intel Corp. (INTC)
The charge:
Leading investors down a yellow brick road while it walked the trail of tears
How do you find the defendant?
First charge: Misleading investors
Not guilty
Guilty
Discuss it!
The prosecution: Ladies and gentlemen of the jury, the facts speak for themselves. Intel warned on Sept. 23 that its Q3 sales would advance only 3 percent to 5 percent over its Q2 mark of $8.3 billion and that gross profit margins would come in at 62 percent instead of the targeted 63 percent to 64 percent Intel had hoped for.
So why the sudden change of tune? As recent as midsummer, Intel was predicting strong growth in PC sales that would boost Intel's numbers for the next two quarters. In fact, Intel could barely make chips fast enough to put into new PCs. Yet less than two months later the scenario is turned on its head? How so?
My friends, it is abundantly clear that economic pressures are here to stay. The news is already bad from Europe, from which Intel draws some 20 percent of its revenues. The Europeans do not like Greenspan's tendency to continually jack up interest rates (rates have increased five times this year), and inflation continues to be a concern. Euro Zone inflation was at 2.4 percent and 2.3 percent in July and August, respectively, well above the European Central Bank's (ECB) preferred level of 2 percent.
And we haven't even begun to talk about the summer drama in the oil sector that saw leading economic powers wringing their hands over the $30 price tag for a barrel of oil. Heck, European gasoline prices alone could be enough to ruin any hopes Intel might have had of seeing sales above Q2 levels. Even World Bank president James Wolfensohn recently warned that skyrocketing oil prices could dent GDP in developed countries by as much as three quarters of a point. What, Intel thought it would shake off a little GDP decline?
So either Intel was not reading the road map properly or it foolishly saw itself as impervious to such pressures. Either way, Intel should have gotten the bad news out there earlier instead of playing traffic cop, instructing rubbernecking investors to "move along, nothing to see here."
Guilty is the only verdict to return here.
The defense: Ladies and gentlemen of the jury, I have two words for you to describe the true nature of the situation at hand for Intel: weak euro.
My friends, currency is a foe that often strikes without warning and when it strikes, it takes few prisoners. Many of you will remember a seemingly insignificant currency called the baht. But when the Thais floated it back in 1996, it became as hard to swallow as that spicy Thai food. The indigestion rippled throughout Asia and impacted Intel and everyone else who had fabs and other business interests in the region.
However, that was a much more severe a scenario than the zigging and zagging of the euro, a currency that is much more robust than the baht and most other Asian currencies.
The fact of the matter is that right now there is concern but not panic. According a recent European Central Bank report, the Euro is impacting producer intermediate goods, but is yet to trickle into non-energy consumer goods. Intel's announcement was merely a precaution so as to make sure that there were no unexpected surprises in its Q3 report.
As for the euro, the United States and Japan intervened Friday to help give the currency some legs. With the credible backing of two leading world currencies, this unfortunate incident could very well take a turn for the better. And that would help put Intel back in the driver's seat. For in no way should Intel's warning be construed to mean that consumers don't want to buy computers. Sure they do. The price points just need to agree with European pocket books and that should not be a problem moving forward.
It's true that Andy Grove once said that "only the paranoid survive," but that doesn't mean that investors should flee the stock. Indeed analysts came out in support of the stock on the day after the warning. PaineWebber, for example, reiterated its "attractive" rating on the stock and Credit Suisse First Boston maintained its "strong buy" rating.
Intel's warning does not herald the end of PC and chip sales as we know them. If anything, a moratorium on negativity should prevail at least through the holiday season, when sales are historically strong. Should the numbers there be poor during this time, then maybe it's time to review our outlook on the PC and chip sectors. But no one should review anything until after we ring in the New Year.
Guilty or not guilty?
The people v. Intel
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#35 of 54 by Intel Human Relations Department
Posted Tue 26 Sep '00 (04:00 AM) Please, be advised that Patrick Nicholson has been
terminated effective today, 26-th of September, 2000 for
violation of Intel Employee Conduct policies.
We hope it will provide a sufficient warning to other
Intel employees who are tempted to disclose internal
company information on public Internet boards.
#36 of 54 by Paul
Posted Tue 26 Sep '00 (08:21 AM) Yeah right, #35.
Guilty? Thanks for making the stock so cheap.
#37 of 54 by Paul
Posted Tue 26 Sep '00 (08:26 AM) Sorry, I couldn't resist:
"Human Relations"? As apposed to "Non-Human Relations"?
#38 of 54 by Mr. Sanders
Posted Tue 26 Sep '00 (09:26 AM) Calling his broker from his cell phone...
"Buy as much Intel stock as you can. I can't believe these
bargain prices."
Not Guilty
#39 of 54 by No name guy
Posted Tue 26 Sep '00 (09:33 AM) Maybe we need to step back and be cool but watch closely.
Anger won't solve any problem.
#40 of 54 by Rodan's Wishful Thinker
Posted Tue 26 Sep '00 (11:15 AM) Man! 60+ percent margins? I want that company!
Any company making that kind of margin is going to be around
a while. Maybe AMD is eating into Intels market share, but
you can't tell from the margins.
As for Guilty/Not-Guilty, I believe Intel is a victim of the
fluctuating euro, and reduced discretionary income in Europe
due to rising oil prices, just like many other corporations.
All they really did was issue a CORRECTION to their
PROJECTIONS. And the corrected projections still look a lot
better than many other companies. Innocent, at least as
much as any modern corporation can be.
#41 of 54 by EYEH82W8
Posted Tue 26 Sep '00 (11:19 AM) Guilty as charged. Intel will only redeem when it humbles
itself for misguiding its investors and loyal customers
who presently feel violated and poorly used. I had a poor
opinion of stock analysts, but now have an even poorer
opinion of company executives who cannot provide a
clear vision or any leadership so they resort to getting
into bed with analysts to prop up their company while
tearing down another company.
Intel has lost its leadership position and seem to be stuck
in a rut of their own making. Their production mix and
efficiencies are horrible, their new products are
second-rate, and their roadmap leads us to the inescapable
conclusion that within 2 years they will be well-nigh
irrelevant, having ceded the high and mid end to AMD
and the low-end portion of the processor market to TMTA
(yet to be determined -- JMHO).
As INTC struggles to reinvent itself by duking it out
with the likes of Via and Broadcom, maybe it should
consider a refocusing on its core business, its basic
values, and providing a good product (along with some
common decency) to its customers -- along with a dose
of humility, those things might cause me to reconsider
my current low opinion of INTC.
INTC used to be looked at as a leader. They used to work
well within the industry and compete with decency and
respect. They had superior people, superior vision, and
executed to deliver a superior product. Now, we see a
company that is without vision, a confused mixture of
poorly concieved and delivered products, and having no
strong center. INTC, please get your act together!!!!!
#42 of 54 by leegs1
Posted Tue 26 Sep '00 (11:32 AM) Will Intel ever split again? I think so. Buy,buy,buy! Not
Guilty.
#43 of 54 by Scarlet
Posted Tue 26 Sep '00 (12:13 PM) Guilty as charged. Mis-Managed company for sure.
#44 of 54 by DayTradR
Posted Tue 26 Sep '00 (12:43 PM) Hamburgers taste good with ketchup. Yummy.
#45 of 54 by realtime
Posted Tue 26 Sep '00 (12:45 PM) Does anyone see a difference between the "pump and
dump"teenager and the "analysts"? Is it maybe a salary from
big investors?
#46 of 54 by W.J. Sanders III
Posted Tue 26 Sep '00 (12:59 PM) No way hoze! Musterd is waaaaay more gooder than kechup!!!
DUH!!!
Go Bengals!
#47 of 54 by anonimus
Posted Tue 26 Sep '00 (01:14 PM) i think AMD is waaay cooler than Intel. You shood all
persons git AMD prosessers it wood be good yes i think so.
Go Bengals!
#48 of 54 by A AlDahhan
Posted Tue 26 Sep '00 (02:08 PM) Profit is down from "hoped" 63% to 62%. Missed by 1/63. Big
deeeeeal!!! Moreover, 3Q sale is higher than 2Q. Well,
then what do you think 4Q sale is gonna be, with all the
holidays' lights shinning already.
Someone might expect as much as he wants. Numbers could
fall above or below his expectation. So what?
I think the market had very much over reacted. In fact, the
released figures are promising. How could INTC be guilty???
#49 of 54 by M-o-o-o-o-o................
Posted Tue 26 Sep '00 (03:03 PM) Mooooooooooooooooooo!
#50 of 54 by typhoon
Posted Tue 26 Sep '00 (03:59 PM) I say guilty, but not for Ali's reasons.
Don't believe the hype!
Dell, Gateway, Compaq and HP were quick to deny Chipzilla's
claims that the there is an unforseen slump in the European
market. By making the announcement, they also jeopardize
the stock prices of OEMS that have already been burned by
recent Intel fiascos (RDRAM, MTH, 1143GHz PIII recall, low
yield of gig-chips, etc.)
While I can't say whether AMD has taken a significant chunk
out of INTC's posterior in terms of sales, I do know that
they are better positioned for chip releases in the
forseeable future, at least until the PentIV is released in
quantity at a decent price. In techie circles, AMD is seen
as having the better product at the moment. Unfortunately,
consumer opinion is more easily swayed by people dancing to
disco music in colorful clean-suits than cold, hard facts.
#51 of 54 by Chuck Starfighter
Posted Tue 26 Sep '00 (04:20 PM) I believe that asking for a vote where the choice is between
two falsities is a unethical, if indeed not just corrupt.
And I can't believe anyone would seriously present a case
*against* Intel without mentioning AMD unless they are so
corrupted as to accept a disinformation job.
Intel,
Lost speed crown to AMD.
Lost yields crown to AMD.
Lost SIMD support crown to AMD.
Got coppermine name, but lost copper to AMD.
Virtually "married" RAMBUS, and tried to force the market
to adopt DRDRAM, where they'd enjoy the advantage of royalty
free use of RAMBUS interfaces with their chipsets; and
luckily failed.
Will begin to lose servers to AMD with the advent of the
760MP chipset in december.
Had to recall 1.13 gig. after pushing the overclocking too
far.
Now all c0 stepping chips appear to be unable to work in
SMP configurations...
Itanium 3 years late and still not shipping.
P4 needs a one-pound heatsink.
Last quarter earnings complemented by $3.5B sale of Micron
stock.
Its holdings of other companies' stocks slip from 11 to 7
billion between January and July.
AMD ahead of the game in .13u.
AMD ahead of the game in Si28.
AMD ahead of the game in cache technologies
(non-overlapping 16-way).
I won't mention MTH recalls and other old news.
And NOW it warns!!!... but points its filthy finger to
Europe as escapegoat.
It's high time the bastards be put in their place.
#52 of 54 by dumb?1
Posted Wed 27 Sep '00 (01:09 AM) Could this all have been an error?
I saw the initial stories and it read like Intel had
slipped
68%. I even saw a few news articles that stated it point
blank. 68% Is far different than the actual 3%. Could
have large Investors Over reacted started the selloff and
are now Just waiting for the Bloodshed to end?
#53 of 54 by airbusman
Posted Wed 27 Sep '00 (02:07 AM) Intel has a goog management infrastructure that will not
stand still. I see intel as a buy and the euro as a buy as
well. The U.S.will intervene in it downslide to keep
stability. Why is Greenspan in Europe now!
#54 of 54 by BennyB
Posted Wed 27 Sep '00 (02:14 AM) Folks, how could AMD take a huge hunk off INTC's ass in
sales? They have two medium size Fabs for processors,
and little else in the pipeline - once the volume demand
REALLY hits them, you'll see the true definition of crap
execution. Like it or not, they are their own limiting
factor, and don't seem to be too bothered by it. Now would
be the time for them to strike, but that opportunity is
going to pass very quickly. As for missed predictions, what
possible benefit can come from misleading investors????
They ain't the first and won't be the last for this, but it
doesn't mean there was any intention to mislead......... |
