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

To: Paul Engel who wrote (113821)	10/16/2000 8:35:06 PM
From: puborectalis	Read Replies (1) \| Respond to of 186894

Intel delays 1.13-GHz Pentium III, plans modification to chip By Mark Hachman TechWeb News (10/16/00, 10:55:41 AM EDT) SANTA CLARA, Calif. -- Intel Corp. is entirely reworking the 1.13-GHz Pentium III processor, delaying the high-speed MPU until the second quarter of 2001. All of Intel's 0.18-micron Pentium III line is undergoing a new core "stepping," or manufacturing revision, according to a product change notification notice sent out by Intel and obtained by TechWeb. A second, newer version will be used to fabricate the new 1.13-GHz chip, an Intel spokesman said. Such "steppings" are uncommon, although expected through the course of a chip's life. New steppings are usually used to fix errata in the chips, or allow those chips to run at higher speeds. What is unusual, said industry sources, is that the new steppings are usually planned to prevent an interruption in the steady introduction of faster clock speeds. Intel announced "limited production volumes" of the 1.13-GHz Pentium III in July, in a war of press releases the company has waged with rival Advanced Micro Devices Inc. However, Intel pulled the plug on the 1.13-GHz chip at the end of August after noting an intermittent glitch that could result in data loss (see Aug. 28 story). Observers said the delay makes sense, given that Intel had already made what hay it could with the announcement of the chip. "Why bother jumping through hoops with a part that was going to be released in limited availability?" one analyst asked. All of the Pentium III microprocessors from 800-MHz on up will be affected by the so-called "C0" stepping, which has been in circulation for some time now, albeit in sample form. The C0 stepping shrinks the Pentium III's die size by 5%, also correcting some latent errata. Intel's plan is to release the new 1.13-GHz chip in a "flip-chip" FC-PGA package only, which will use an entirely new stepping, the Intel spokesman said without elaboration. The chip will still apparently be manufactured upon an 0.18-micron process. A second 1.13-GHz chip, the Coppermine-T, is expected a quarter later, according to sources and other published reports, but will use a finer 0.13-micron process. The delay will also provide a neat segmentation between the Pentium III and Pentium 4. While the Pentium 4 is expected to ramp from 1.4-GHz and 1.5-GHz at its launch Nov. 20 upwards to about 2.0-GHz in the second quarter of next year, OEMs aren't clear on the minimum speed of the Pentium 4 at the time. What this means is that there might be a sizeable gap between a 1.13-GHz Pentium III and a 1.4-GHz Pentium 4, if it still exists. "Certainly our focus is the Pentium 4," the Intel spokesman said. "The way I look at is by market segment. Here's a 1.4-GHz for consumer enthusiasts and business power users, and it's the fastest thing since a 1-GHz Pentium III." Before the Pentium 4's launch, AMD will attempt to cut into Intel's lead. The launch of the 1.2-GHz Athlon desktop processor and the 800-MHz Duron are expected soon; according to one unconfirmed source, and the chip is scheduled to be announced before Oct. 30, the day of the original release of the Pentium 4. The chips have shown up on Pricewatch.com and other online retailers for $109 and $519, respectively, on an individual basis; a 1-GHz Athlon now sells for about $300. A spokesman for AMD in Sunnyvale, Calif., would say only that the chips are expected "shortly."

To: Paul Engel who wrote (113821)	10/16/2000 10:08:01 PM
From: Maverick	Read Replies (1) \| Respond to of 186894

SSB:cancellation due to over-ordering,won't ramp P4 rapidly as it depends on RAMBUS, run hot, expensive From SSB 10/16/00 Intel Corporation (INTC) INTC: Reduce Estimates and Target price 2M (Outperform, Medium Risk) Mkt Cap: $282,902.3 mil. October 16, 2000 SUMMARY * Given the on-going weakness in the personal computer SEMICONDUCTORS motherboard, chipset and memory markets, we now believe Jonathan Joseph there is a chance Intel reports slightly below recent Q3 guidance of 3-5% sequential revenue growth. We are reducing our Q3 revenue outlook from 4% to 2% growth and Dunham Winoto Q3 EPS from $0.38 to $0.37 (versus $0.28). * More importantly, the company continues to rapidly expand capacity at a time when demand is coming in much weaker than anticipated, which we believe will have a leveraged and negative impact on margins in Q4 and in 2001. * We are trimming our Q4 EPS estimate from $0.40 (versus $0.35) to $0.37 on a 100bp gross margin reduction to 61% and 2001 from $1.75 to $1.55 on a 250bp gross margin reduction to 59.5%, which may result in down earnings for the company next year. FUNDAMENTALS P/E (12/00E) 25.4x P/E (12/01E) 26.1x TEV/EBITDA (12/00E) NA TEV/EBITDA (12/01E) NA Book Value/Share (12/00E) $5.23 Price/Book Value 7.7x Dividend/Yield (12/00E) $0.06/0.1% Revenue (12/00E) $33,592.0 mil. Proj. Long-Term EPS Growth 25% ROE (12/00E) NA Long-Term Debt to Capital(a) 2.3% INTC is in the S&P 500(R) Index. (a) Data as of most recent quarter SHARE DATA RECOMMENDATION Price (10/13/00) $40.38 Current Rating 2M 52-Week Range $74.88-$32.56 Prior Rating 2M Shares Outstanding(a) 7,006.0 mil. Current Target Price $50.00 Convertible No Previous Target Price $75.00 EARNINGS PER SHARE FY ends 1Q 2Q 3Q 4Q Full Year 12/99A Actual $0.29A $0.26A $0.28A $0.35A $1.16A 12/00E Current $0.36A $0.50A $0.37E $0.37E $1.59E Previous $0.36A $0.50A $0.38E $0.40E $1.64E 12/01E Current $0.37E $0.38E $0.39E $0.41E $1.55E Previous $0.40E $0.43E $0.46E $0.47E $1.75E 12/02E Current NA NA NA NA NA Previous NA NA NA NA NA First Call Consensus EPS: 12/00E $1.66; 12/01E $1.76; 12/02E NA SUMMARY (CONTINUED) * Given that Intel's stock has been virtually cut in half last six weeks, there is no change to our rating. We are, however, cutting our price target from $75 to $50, still 32x our new out-year estimate. STILL LOTS OF WEAKNESS IN THE CHANNEL The much hoped for mid-October pickup in personal computer demand has failed to materialize, which suggests to us Intel's guidance on its Tuesday afternoon conference call will be more cautious than most investors anticipate. There is not much out there to tout for the company: Europe is weaker than anticipated, U.S. corporate is coming in lighter than forecast, and even Asia appears to be weakening (Via Technologies, the leading chipset supplier in Taiwan recently guided down for Q4). The recent shortfall relative to plan is therefore turning out to be a one-two punch: the company has been getting cancellations due to over-ordering during the shortage over the last year while Intel's customers are seeing a sharp falloff in demand themselves. Given that Q4 is traditionally a strong quarter, we still expect sequential revenue growth of about 4% (trimmed from our earlier 5% estimate), but it is now conceivable that Q1 could decline from Q4, setting up for a soft overall 2001. MEANWHILE CAPACITY IS A RUNAWAY TRAIN A shortfall in unit demand relative to forecast is not unusual in any market. However, the shortfall could not come at a worse time for Intel. The company has just increased capital spending 71% to $6 billion to overcompensate for the shortage they thought their customers were experiencing over the last year. Meanwhile, we figure the company is coming in 10-15% over-capacity in Q3 and perhaps 15-20% over-capacity in Q4. This unabsorbed capacity will likely have a negative impact on margins in Q4 and into 2001. It seems only common sense that Intel will soon be forced to cut capital spending to reduce excess capacity. Even so, it is probably too late to expect there will be no impact to the near-record gross margins the company has been running lately. OTHER PROBLEMS LOOMING The weakness we have begun to see at Intel should lead into other problems we expect to see at the company in the next couple of quarters. 1) Competition over the next 12 months will be fierce as Advanced Micro# (AMD, $21.88, 2S) ramps capacity sharply and other players, like Via Technologies, increase output of x86 processors. All in the face of a slowing PC market. 2) Intel will not ramp the new P4 very rapidly, given that it is Rambus DRAM dependent (a highly unpopular memory), is a big chip, runs hot and is expensive in this generation to manufacture. By mid-2001, the company should have a PC-133 capable chipset. Until then, it is dependent on the Pentium III to continue to push up the Gigahertz scale, something it was never designed to do. As a result, the company may suffer ASP erosion until the P4 ramps in volume. CHANGES TO THE MODEL MOSTLY MARGIN DRIVEN We reduced our Q3 EPS estimate from $0.38 to $0.37 and revenues from $8.63 billion (up 4% qoq and up 18% yoy) to $8.47 billion (up 2% qoq and up 16% yoy). Most of the reduction comes from lower revenues and a 100bp reduction in gross margins. We also cut our Q4 EPS estimate from $0.40 to $0.37 and revenues from $9.06 billion (up 5% qoq and 10% yoy) to $8.81 billion (up 7% yoy and 4% qoq), and trimmed margins by 100bp to 61%. Finally, we cut our 2001 EPS estimate significantly from $1.75 to $1.55 and revenues from $38.37 billion (up 13%) to $37.45 billion (up 12%). We cut sharply 2001 gross margins from 62% to 59.5% and operating margins from 32.4% to 27.9%. All of these earnings estimate changes are based on operations and do not reflect any marginal change in contribution from non-operating income like the sale of securities.