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Politics : Formerly About Advanced Micro Devices -- Ignore unavailable to you. Want to Upgrade?

To: stribe30 who wrote (136955)	5/18/2001 2:48:18 PM
From: tejek	Respond to of 1579998

Intel Is Developing a New ... Rut By Caroline Humer Senior Writer 5/18/01 1:59 PM ET More than halfway into what's supposed to be the "trough" quarter for chips, there are no signs that microprocessor giant Intel (INTC:Nasdaq - news - boards) is going to emerge anytime soon from its current downdraft. Despite its belief that business will get better, Intel is facing a formidable list of issues this quarter. Smaller competitor Advanced Micro Devices (AMD:NYSE - news - boards) is winning contracts from companies that once dealt only with Intel. Intel has cut prices sharply to make sure it doesn't cede any more market share. And a general decline in PC demand has eaten into shipments of the Pentium 4 as the company ramps up volume. Intel Talks Up a Turnaround All those factors could affect Intel's ability to meet second-quarter earnings and revenue estimates. Concerns about the quarter already have been surfacing. Earlier this week, Thomas Weisel Partners cut Intel to market perform from buy, saying that the company would fall short of the $6.2 billion to $6.8 billion in revenue it has said it will bring in during the second quarter. (Weisel has done no underwriting for Intel.) That came a few days after rumors began circulating among market players that Intel was going to issue a warning regarding its guidance. It didn't. Then on May 14, Credit Suisse First Boston began telling clients that Intel's first month was running 30% below expectations, according to Briefing.com. (CSFB's semiconductor research team didn't return calls requesting comment.) Intel declined to comment, but it has said in the past that its pricing was factored into revenue guidance. The Comparisons Amid the problems, the constant comparisons with AMD, a rival that once couldn't get its act together, may be the toughest for Intel to take. And investors seem to believe the hype. Since the start of the second quarter, AMD's stock has gained 19%, while Intel's has gained 9%. And since the beginning of the year, AMD has jumped 128%, while Intel has fallen 6%. Parting Ways AMD's stock has blown past Intel's this year as it has taken market share from the chip giant That trend may not change anytime soon. AMD has managed to capture investors by pulling in more customers. In the first quarter, AMD picked up about 4 percentage points of market share, according to Mercury Research, though it still trails Intel by a wide margin. Much of the gain came from the faster, high-performance sector where it picked up five percentage points of market share. This is a new market segment for AMD, which has traditionally focused on a slower, value chip. This week, AMD announced that it was launching a new high-performance chip for mobile applications -- with the strangely familiar name of Athlon 4 -- and that Compaq (CPQ:NYSE - news - boards) PCs would use the chip. Weisel's Ross expects AMD to announce next month that it has cracked Dell (DELL:Nasdaq - news - boards). Dell is the only PC maker that uses Intel chips exclusively. And later this year, AMD will launch its first chip for the server market, where it hopes to grab market share as well. The Response Intel isn't just standing by, of course. The company is trying to defend its territory by cutting prices and pushing into new markets. It's aiming at the communications market and Thursday announced the launch of a new chip for wireless applications. And it's in the midst of a technological overhaul, changing not one but two major elements of its production process starting this year. So far it's been well compensated for those efforts. It trades at 51 times 2001 earnings. But the gap with AMD is closing; after years of single-digit price-to-earnings ratios, AMD now trades at 24 times 2001 earnings. Of course, the company still needs to overcome the lingering fear among investors that, after its execution problems in the past, it will fail to come through with the better chips companies now expect from it. Intel isn't waiting to see how AMD executes. It began slashing prices on its microprocessors early this year and has gotten more aggressive in the past month, introducing sales of its fastest Pentium 4 chip at about $350 -- not the $700 it might've asked for in a stronger market. That kind of blue light special will take its toll this year. Cutting the price of each chip and enabling the Pentium 4 to move into other, lower markets may help Intel maintain its market share, but both Intel and AMD are going to pay for the lower prices as their profit margins erode. "They are both going to suffer from EPS declines and probably pressure to the stocks as well," says Dan Niles, a chips analyst at Lehman Brothers, which hasn't done underwriting for Intel or AMD. Possibilities In the long term, though, the strategy may not be as bad as it looks, Niles says. Intel can easily outspend AMD. Intel had about $11.6 billion in cash and short-term investments at the end of the first quarter, while AMD had about $1.6 billion. And Intel has committed $7.5 billion to capital spending this year, which will give it a leg up over the long haul. The smaller AMD, which had $4.6 billion in revenue in 2000 compared with Intel's $33.7 billion, plans to spend only $1 billion. The price war comes at a time when both semiconductor and PC makers say that the business is so bad, it must be scraping bottom. Niles says that Intel had no choice but to cut prices because PC makers aren't buying as many chips as it expected. He thinks the demand for the Pentium 4 is running at about half of what some analysts had anticipated. Weisel's Ross sees only 1 million to 1.5 million Pentium 4 units shipped this quarter and a total of 10 million units for the year -- down from the 20 million that Intel had told analysts to expect. "There's just no demand for PCs at the high end," Niles said. Dell seems to agree. On Thursday the company said business can still get worse -- it expects revenue to fall 3% to 5% in the quarter ending in July. During a conference call, Dell was vague about whether turnaround is in the immediate offing, though it was slightly more confident that demand will pick up later this year. But that's not likely to help Intel out of its rut anytime soon.

To: stribe30 who wrote (136955)	5/18/2001 2:48:21 PM
From: TimF	Read Replies (1) \| Respond to of 1579998

So let me get this straight: you're advocating you dont research any alternative fuels until you absolutely have to when the oil runs out?? No, that is not what I advocated. 1 - Not all research is government research. 2 - The oil won't just run out. It won't be flowing in massive quantities one day and then be gone the next. It will gradually become less available and more expensive. The price will swing up and down sometimes violently but the long run trend should be a gradual increase in price. When it becomes expensive enough alternate fuels will be used. The oil will not have run out people will still be using it as well but less and less of it as the price goes up. Ethanol is not ridiculously expensive like some of the other alternatives. But it is still more expensive then gasoline. Also a very large amount of land would have to be devoted to growing crops for conversion to ethanol if it was to replace most gasoline use. It isn't necessarily any better for the environment then burning gasoline. It doesn't work as well when its very cold and it is more corrosive then gasoline. Also some studies suggest that it can take more energy to produce ethanol then you would get from burning it as a fuel. (These studies vary a lot in their conclusions so it isn't really clear at this point) It does have an advantage in that it would allow for higher compression ratios and thus more power per engine volume, but their would be a high cost to convert cars and the distribution network to use ethanol. Check out this site afdcmap.nrel.gov it shows one gas station within 100 miles of my house that will supply 85% ethanol. Wind power isn't an "alternate fuel". It is useful in some situations but will never be more then a marginal contributor as an energy source. Solar power has a slightly larger change to make some significant contribution but it can not replace oil and gas. It will only meet a small % of our energy needs unless you go to exotic and expensive solutions like solar power satellites. I can see a push for more conservation but ethanol, solar power, and windmills are not going to be significant contributors. Tim