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Technology Stocks : Advanced Micro Devices - Moderated (AMD) -- Ignore unavailable to you. Want to Upgrade?

To: dale_laroy who wrote (35701)	4/13/2001 10:13:48 PM
From: niceguy767	Read Replies (1) \| Respond to of 275872

dale: "I just posed the question of a what if scenario. I do not think that Intel will disappoint. And the only quarter that I think they have a significant potential for a loss in will be Q3." Before I respond, just want you to know that the Blue Jays won 2-1...The Jays look like world beaters and "Rudy's" (our 30 year old rookie left handed pitcher) the man!!! Not sure what you mean by disappoint...is a 10% decline in revenues y/y and a 50% decline in eps a disappointment??? If I were an INTC shareholder, I'd be mightily disappointed by such performance, particularly in light of negative prospects for the remaining 3 quarters of the year and in light of highly probable negative performance vis a vis a competitor 1/50th the size... Concerning the possibility of a negative Q1 eps, I'd attach a probability of 5 to 10%...What would have to occur for such an outcome is a 25% drop in revenues as management has already guided, a capital write down on investments of $400 million, a gross margin decline in excess of 10% and a decline in units shipped of greater than 10%...Impossible, no, improbable yes...But the real stickler for INTC is what will happen in Q2, Q3 and Q4...It just doesn't get any better in the remainder of the year for INTC, despite PR assurances (which have been incessant, but incorrect, for the past 12 months during which the INTC negatibve trend has steepened)...The distinct possibility exists that Q1 is INTC's high water mark and that it's all downhill for the remainder of the year!!! Should the analysts twig to such a scenario as the most likely outcome, INTC could be at $17 in a heartbeat, not unlike CSCO and not unlike SUNW and not unlike NT and, god forbid, not unlike Lucent!!! No matter which way I turn INTC's numbers, INTC is wildly overvalued at $28 given the not unseemly low probability of a negative revenue growth rate exceeding 10% in Y2001 and the not impossible outcome of a significant loss in Y2001 for the first time in many, many years!!! INTC no longer has the luxury of offering a product portfolio in spaces that are unchallenged assuming the imminent arrival of a very price/performance competitive palomino family of products from AMD and with the loss of monopoly in these spaces comes significant erosion in gross margins in the mobile, server and workstation spaces, not unlike those witnessed over the past 12 monthss in the consumer space and INTC no longer has a capital gains pool to draw from in which to beef up earnings (In fact the capital gains pool has recently become a millstone around INTC's neck which may in fact elicit significant write downs over the remaining Q's in Y2001 as opposed to hte rather substantial gains which buoyed up earnings in Y2000) ...Hey, if I were an INTC investor I'd jump ship at $28 real fast and climb aboard the AMD lifeboat, once the dust from Tuesday's revelations settles!!! The latest consensus for Y2001 for INTC is around $0.70 eps which at $28 implies a p/e ratio of 40...WOW!!! And from what I see ahead for INTC, $0.70 is awfully generous...Imho, $0.70 for INTC has a 10% probability of occurrence or about the same probaility as does a negative eps in Y2001...Q1's results will probably alter my assessment of these probabilities, but if I had to guess now, I'd say that the negative eps scenario's probability might be raised to 25% after reviewing the content (as opposed to wish list) of INTC's Q1 report!!! Interesting times at INTC to be sure!!! Interesting week ahead and exceedingly high probability of crossover by AMD (by the end of April, if not by the end of the upcoming week) once again only with no turning back by AMD this time around!!! (For the record, optimistically, I currently see a Q1 for INTC of $7.5 billion revenues and $0.20 eps and declining eps's throughout the remaining quarters of the year and a Y2001 revenue decline of 10% and a whole year eps of $0.30) ...At $28, in such a scenario, INTC is priced at twice what might be considered reasonable given the current negative revenue growth prospects, imho!!! The question begs, should such a scenario be supported in fact by Q1 hard data, will INTC's devaluation be abrupt or gradual??? If CSCO, MOT, NT, GTW, CPQ and a host of others recent disappointing earnings could result in an abrupt price devaluation, then so too could any negative surprise by INTC... We've come full circle now...So what constitutes a negative surprise for INTC??? From my vantage point any y/y revenue decline greater than 10% and any y/y eps decline greater than 50% is the recipe for huge problems in succeeding quarters and thus constitutes a negative surprise...