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

To: Tenchusatsu who wrote (124436)	1/8/2001 7:51:45 PM
From: AK2004	Respond to of 186894

Tenchusatsu - not a good ssb report <edited> you might find the following reading amusing and don't you love this $70 rambus subsidy - still think that flexibility is bad? :-)) Regards -Albert ps before you attack me I have to tell you that I hold intel spreads - hence intel investor :-)) 04:55pm EST 8-Jan-01 Salomon Smith Barney (Jonathan Joseph 415-955-4998) INTC INTC: 4CQ Earnings Preview SALOMON SMITH BARNEY Intel Corporation (INTC) INTC: 4CQ Earnings Preview 2M (Outperform, Medium Risk) Mkt Cap: $224,612.4 mil. January 8, 2001 SUMMARY * Fourth calendar quarter earning preview. SEMICONDUCTORS Jonathan Joseph 415-955-4998 jonathan.joseph@ssmb.com Dunham Winoto 415-951-1875 FUNDAMENTALS P/E (12/00E) 19.3x P/E (12/01E) 22.6x TEV/EBITDA (12/00E) NA TEV/EBITDA (12/01E) NA Book Value/Share (12/00E) $5.38 Price/Book Value 6.0x Dividend/Yield (12/00E) $0.06/0.2% Revenue (12/00E) $33,782.0 mil. Proj. Long-Term EPS Growth 25% ROE (12/00E) 31.4% Long-Term Debt to Capital(a) 1.6% INTC is in the S 500(R) Index. (a) Data as of most recent quarter SHARE DATA . RECOMMENDATION Price (1/5/01) $32.06 Current Rating 2M 52-Week Range $74.88-$30.06 Prior Rating 2M Shares Outstanding(a) 7,006.0 mil. Current Target Price $45.00 Convertible No Previous Target Price $45.00 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 $0.36E $0.50E $0.41E $0.38E $1.66E Previous $0.36E $0.50E $0.41E $0.38E $1.66E 12/01E Current $0.35E $0.35E $0.36E $0.36E $1.42E Previous $0.35E $0.35E $0.36E $0.36E $1.42E 12/02E Current NA NA NA NA NA Previous NA NA NA NA NA First Call Consensus EPS: 12/00E $1.64; 12/01E $1.51; 12/02E $1.97 COMPANY OVERVIEW Intel is the world's largest semiconductor company as well as the leading supplier of microprocessors used in personal computers and servers, with about 80% of the market. Microprocessors make up about 78% of sales, followed by Flash memory (6%), PC boards (3%), and chipset logic and other (14%). The company is seeking to diversify into faster growing markets through acquisitions of wireline and wireless communications IC companies and by establishing web-hosting services. Figure 1. INTC Earnings Estimates INVESTMENT OVERVIEW Early last month Intel revised downward Q4 revenue expectations from 4%-8% growth to flat, plus or minus a couple of percentage points. We fully expect that the company will hit in the range of its guidance. However, given the signals from the personal computer and Taiwanese motherboard markets, we are more concerned about the outlook for Q1. We now expect Q1 revenues to decline by 10%-15%, compared to our earlier estimate of flat revenues. The reason, we believe, is twofold: 1) demand in the PC market remains very weak, and customers continue to work off inventories, and 2) we are increasingly hearing of personal computer component companies, like Intel, "borrowing from Peter to pay Paul." That is, they are taking from Q1 to make Q4. The implications, of course, go beyond revenues to margins. We are already forecasting a revenue decline of 500bp over the next 12 months. With the kind of revenue decline we now believe possible, the company could lose 300bp in Q1 alone. 1) Excess capacity will likely begin to lean heavily on margins as depreciation grows but revenues fall away and are no longer able to cover the higher expenses. Despite the fact that Intel was experiencing a demand shortfall, open requisitions took in $500 million more in equipment in Q4 than the company planned thanks to cancellations elsewhere. This resulted in the company increasing capital spending from $60 billion to $6.5 billion in 2000. 2) The company is pulling forward the P4, which is not only a larger die (more expensive to make), but also will come with a $70 subsidy on every system shipped to offset the higher price of Rambus memory. Rather than our current Q1 EPS estimate of $0.35 (versus $0.36), we now believe earnings could come in closer to $0.30; 2001 EPS of $1.42 may fall to $1.30, or less.