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

To: The Duke of URL© who wrote (134135)	5/4/2001 1:56:48 PM
From: Hawk	Respond to of 186894

Still More Hell Awaits Intel -- 2:00 PM EDT by Dan Dorfman NEW YORK (Jagnotes.com)--Call it getting kicked when you're down. Getting the boot in this case is microprocessor kingpin Intel (INTC). Though down roughly 60% from its 52-week high of 75.81, Intel, currently trading at 30.61, continues to get kicked around in Wall Street. The latest boot comes from Merrill Lynch analyst Joseph Osha, who has downgraded his investment rating on the stock from "accumulate" to "neutral." As Osha sees it, there is "no evidence to support a recovery scenario." And the stock, he says, is expensive at nearly 50 times prospective earnings. With evidence of specific company problems continuing to emerge, it makes no sense to own the stock in anticipation of a semiconductor industry upturn later this year, he says. His key reasoning: A rapid earnings recovery is not in the cards. Assessing next year's prospects, Osha notes that some Street earnings estimates run well above $1 a share. The consensus number is $0.92, but Osha feels $0.84 is more realistic. As for the current year, the analyst is projecting $0.67, a wicked 59.3% decline from 2000's reported $1.65. Specifically, why so negative on the company? Osha observes that a look at the relative financial performance of Intel and rival Advanced Micro Devices (AMD), 31.01, in this year's first quarter is instructive. AMD, despite problems with its weak chipset infrastructure and a faltering PC market, managed to sell 6.5 million K7 microprocessors, up from 5 million in the December quarter. On the other hand, Intel's microprocessors fell from 29.9 million to 23.9 million over the same period. Further, in the same quarter, Intel's gross margin skidded by 11 percentage points--AMD's fell by just 4 points. The reality says Osha, is that a greater percentage of the PC microprocessor unit market is shifting towards the "value " end of the business and that Intel's pricing and market segmentation model is coming under serious pressure. Accordingly, he feels Intel's ability to continually move upward into a PC market that will pay for incremental performance is under pressure. As such, Osha believes that those investors who are hopeful of a recovery that will allow Intel to realize more stable desktop microprocessor unit pricing once demand recovers are likely to be disappointed. Yet another headache, according to Osha: DRAM (dynamic random access memory) pricing has begun to roll over again. After spiking in March, mainly because of inventory restocking, not improved end demand, any expectations for a May pickup rest purely on hope, not on evidence, says Osha. On another matter--the acquisition front--Osha also takes a negative slant. Unfortunately, he says, the list of Intel's acquisitions in new markets--Xircom, Dialogic and Level One--continues to raise questions about the viability of Intel's growth strategy outside of the PC business. Osha says he can see where owning Intel at more than 40 times earnings might make sense if there were a steep earnings recovery in the cards later this year or next year. However, since he doesn't think such a recovery is coming, he sees no reason to buy the stock over the near term. Osha is hardly alone in his misgivings. For example, over the past month, analysts have issued 25 earnings downgrades--five for the current quarter, six for the third quarter, seven for the current year and six for the next year. Apparently, a fair number of investors share Osha's concerns. This can be seen in Intel's hefty short position (a bet the stock price will fall) of 47.4 million shares. Interestingly, the short position is climbing, having risen from 40.3 million shares the month before. As one short seller sees it: "A classy company, but for now, there's still more hell for Intel." * * *