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

To: herb will who wrote (136466)	6/2/2001 1:19:29 PM
From: Dan3	Read Replies (3) \| Respond to of 186894

Re: you think that nothing could be better. I submit to you that AMD is not doing well. I didn't mean to claim that. The macro economy is in crummy shape, and the sector AMD/Intel is in is worse off than the rest of the economy. AMD is not doing much more than treading water, at best. But I think AMD is a far better off than Intel, mainly because they made their big investment in .13/copper/Pod capable manufacturing plant 2 years ago and are now entering the cash cow phase for that plant. Intel, OTOH, has to make a huge investment in plant to stay competitive with AMD, and make it a time when nobody's going to see much return on any semi plant investment. There is considerable new capacity coming on line in Taiwan, Korea, etc. just as utilization rates for existing capacity have dropped to 50%. Intel has usually been able to produce marginally profitable parts from its one generation old FABs, and this has let them be successful with their policy of adding rather than replacing foundries. Not this time. For the next one to two years, commodity comm and embedded chips from Intel will be competing with chips from asian foundries that will consider themselves lucky to be getting returns that cover marginal direct production costs. Intel is carrying almost $17 Billion of undepreciated plant and equipment on its books, much of which they are presently paying to replace. freeedgar.com That plant is worth plenty, but nowhere near $17 Billion. Intel has to cover the costs of the new plant they're building, and find funds to cover the inevitable write off of 1/3? 2/3's? of that plant, all during what is being described as the worst semiconductor downturn that has ever taken place. Intel shot its wad last fall/this spring with P4, their first major new X86 architecture in 6 years - there's another long dry spell ahead. And they have to practically give the things away. Merced/Itanium/McKinley is two years late and trying to launch into the worst market for servers in recent memory. Merced faces a number of proven competitors, each with a substantial installed software base. This is at a time when those competitors are willing to sell below marginal cost to minimize layoff costs from their manufacturing employees. AMD has been seeing decent demand for some of its products recently, and is probably missing the opportunity to increase market share because they don't have enough plant. But AMD is smart enough to know that for the next year, and possibly the next 2 years, the name of the game is keeping costs down - and they are doing that even as, incredibly, they are maintaining or increasing their market position. So, in an absolute sense, AMD is doing poorly. But given the current stage of the semi cycle, their performance is spectacular. AMD has their next major chip, their most significant ever, scheduled to come out around the earliest point the semi cycle should be starting to recover. As the semi cycle is getting into its next upward phase, the hammer family will be the only fresh architecture available. Timing may not be everything in this business, but it is very important. It may have been pure luck, but AMD's timing has been perfect, and Intel's has been perfectly awful. Regards, Dan