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To: Bilow who wrote (58004)	10/17/2000 6:45:28 PM
From: Sully-	Read Replies (1) \| Respond to of 93625

Intel vs. Advanced Micro Intel's revenue warning in September turned out to be cosmetic. Revenue growth was still strong, margins improved meaningfully, and earnings came in at original expectations. Intel continues to dominate its main competitor, AMD. By Brian Lund (TMF Tardior) October 17, 2000 It looks like reports of Intel's (Nasdaq: INTC) demise were greatly exaggerated. That's good news for my portfolio, since I own it. After the microprocessor powerhouse lowered revenue expectations for the third quarter in September, citing lower-than-expected European sales, analysts lowered their earnings per share (EPS) expectations from $0.41 to $0.38. Sure enough, revenue did fall below the previously expected $9.0 billion, turning in at $8.7 billion, but EPS before acquisition-related expenses came in at $0.41, up 52% over last year. So Intel beat lowered expectations and met the old ones. The 40% drop in the share price since September 21 appears to be much ado about nothing. "Hold on," the attentive reader says. "Did Intel meet their numbers with investment income, as it did in the second quarter?" Er, not so much. The company reported $960 million in interest and other gains, compared with $2.3 billion last quarter. Sure, that's about nine cents per share after taxes, but operations are still doing just fine. Third-quarter operating income, in fact, was $2.86 billion, up 39% over the year-ago quarter and 18.6% sequentially. Margins have remained strong, too. Gross margins hit 64% this quarter, well above 58.7% a year ago. Operating margins reached 32.7%, bettering last year's 28.1%. Net margins boosted to 28.7%, blowing out last year's 19.9%. What's more, Intel is still holding onto $4.55 billion in marketable and $1.3 billion in non-marketable securities (including $2.9 billion in unrealized gains). Oh, and the company has $14 billion in cash. Will someone tell me what's wrong with this company? Ah, that's right -- it's losing market share to Advanced Micro Devices (NYSE: AMD), according to AMD. Of course, Intel says that they gained market share. Let's look at how Intel's third-quarter results compare with its main competitor: Intel AMD Diff. Revenue ($bil): $8.7 $1.21 621% Gross margin: 64% 47% 36% Op. income ($bil): $2.86 $0.26 987% Op. margin: 32.7% 21.8% 50% Adj. net inc. ($bil): $2.8 $0.22 1178% Net margins: 28.7% 18.5% 55% Moreover, average sales prices (ASPs) for Intel's microprocessors were flat quarter-over-quarter, while ASPs fell a small amount at AMD. Don't even get me started on the differences in cash and debt at the company. It's true that AMD has been growing faster, but think of it this way: Intel's revenue increased $431 million sequentially -- that represents about one-third of AMD's total revenue. As to the future, AMD sees revenue growth in the high-single-digits sequentially, while Intel anticipates 4-8% sequential growth. Not a big difference. Intel thinks that gross margins will still be strong at 63%. Intel is not a company that is stumbling over its own feet, as I wrote last week. There is still lots of value creation going on at Intel. fool.com Ö¿Ö