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

To: Dan3 who wrote (146182)	10/28/2001 9:14:15 PM
From: Paul Engel	Read Replies (1) \| Respond to of 186894

How is this creative accounting? Advanced Micro Posts 3rd-Quarter Loss Audio/Video Inside Intel's Earnings Report - (Yahoo! Finance Vision) AMD in-line with lowered expectations - (ON24) Intel closes in on year end - (ON24) By Duncan Martell SAN FRANCISCO (Reuters) - Advanced Micro Devices Inc. posted its first loss in almost three years as the chipmaker suffered from a slowing economy, grim PC sales and a bitter price war with rival Intel Corp., prompting it to warn of an operating loss in the fourth quarter. Advanced Micro Devices (AMD) (NYSE:AMD - news) said on Wednesday it had a loss of $186.9 million, or 54 cents a share, compared with net income of $408.6 million, or $1.18 a share last year. Sales fell 37 percent to $765.9 million from $1.21 billion. Excluding charges related to job cuts and closing two plants, Sunnyvale, California-based AMD posted a loss of $97.4 million, or 28 cents a share, in line with a warning issued on Oct. 5. Analysts were expecting, after the warning, a loss of 28 cents, with a loss range of 18 cents to 30 cents, according to market data research firm Thomson Financial/First Call. In the year-ago period, excluding a gain of $336.9 million from the sale of its voice communications unit Legerity and a charge of $22.9 million for retiring debt, AMD had a profit of $219.3 million, or 64 cents. Shares of AMD fell 95 cents to $9.66 ahead of the report, which came after markets closed. AMD shares have fallen 30 percent this year, compared with a 21 percent decline in larger rival Intel's stock price. Shares of Intel fell 39 cents to $24.57, down 1.6 percent. In after-hours trading on Island Exchange, the stock rose to $9.81. CONFIDENT IN CHIPS, NEW TECH In spite of its first loss since the third quarter of 1999, AMD's outspoken Chairman and Chief Executive Jerry Sanders said he was pleased that it appeared his company lost less than one percent of market share during the third quarter to its far larger rival. And, he said, AMD is well positioned -- with new Athlon XP processors and new manufacturing technologies -- once demand resumes and people and corporations buy personal computers and servers at a renewed clip. ``We feel that when the upturn comes, we're going to kick ass,'' Sanders said on a conference call. He added that the company is seeing decent sales strength in Europe, a recovery in the United States, driven by new products, though Japan continues to suffer from slack demand. According to Mercury Research, preliminary estimates showed AMD's share of the market for microprocessors in the third quarter slipped 0.7 percentage points to 21.5 percent from a revised 22.2 percent in the second quarter. Intel's market share rose to 77.5 percent from a revised 76.7 percent in the second quarter, Mercury Research said. No. 1 chipmaker Intel (Nasdaq:INTC - news) has slashed prices by as much as 84 percent on its Pentium 4 chip since its November introduction, and analysts expect further cuts on Oct. 28. Intel also felt the pain of a slowing economy and PC market. Its net income plunged 95 percent to $106 million, or 2 cents a share, from $2.51 billion, or 36 cents a year-ago, as sales fell 25 percent to $6.55 billion from $8.73 billion. ``It's pretty clear that this desire to cut off our air supply is not painless to them (Intel),'' Sanders said, in an apparent reference to a well-known e-mail in which a Microsoft executive suggested some years ago it had to ``cut off'' competitor Netscape's air supply to prevent it from continuing to dominate the then-nascent Web browser market. AMD, like Intel, didn't sound any reassuring notes about a resumption of demand in the fourth quarter, typically the PC industry's strongest. Sanders said on the call that any recovery in the PC sector was ``most likely extended by declining consumer confidence'' brought on by recent events, including the air attacks on Sept. 11 on the World Trade Center and the Pentagon (news - web sites). But if Intel keeps the pressure on, as is entirely likely, and the PC industry limps out of this year bruised and battered, as it most surely will, what will AMD do until then, and how long is Sanders prepared to endure fiscal losses? ``If the recovery is extended out several quarters, how much loss are they willing to consider acceptable in the meantime?'' said Needham & Co. Dan Scovel. ``The price war started by Intel is theirs to stop.'' AMD said on a conference call that it had record sales of the Athlon and Duron processors in the latest quarter, coming in at more than 7.7 million, which was consistent with the record level of the second quarter. It expects another record fourth-quarter shipment level, too, Sanders said. FOURTH-QUARTER OPERATING LOSS LIKELY Sales of chips in its memory group, mostly flash chip sales, declined 34 percent to $210 million from the second quarter, and reflected continuing weakness in the communications sector and bloated inventories at major customers, AMD said in a statement. The company said that sales of flash chips in the fourth quarter will range from unchanged to growth of 10 percent over the third quarter. It also said it expects again to sell a record number of Athlon and Duron chips in the fourth quarter. Overall, AMD said it expects total company sales to be flat to ``high single-digit percentage growth'' in the fourth quarter. ``Revenues in this range would be insufficient to offset the current level of expenses, and therefore the company currently expects to report an operating loss in the fourth quarter,'' the company said in a statement. A survey of analysts by First Call expect the company to post a loss of 21 cents a share for the fourth quarter. Sanders also said that the company is still on track to hit 50 percent market share in the U.S. retail laptop market, but sales of mobile processors represent only about 5 percent of the company's total sales. Email this story - View

To: Dan3 who wrote (146182)	10/29/2001 12:00:48 AM
From: semiconeng	Respond to of 186894

So that's "goodwill." It's both goodwill in the classic sense, and things like licenses, brand names, and copyrights. Intel has gone from nearly no goodwill on its balance sheet, to roughly $6 Billion on its balance sheet since 1999. Those entries were made to account for the profits expected to come from the value of the name brands, labeling, and production rights picked up when Intel bought those companies that have been put into the "other" category. ---So, I don't think that intel bought into any of those companies expecting profits, at least not in the near term. They were bought to diversify intel. By the way, Intel broke out the comm group in it's last report, and so it is no longer "other". Also, Intel's data actually did seem to suggest that prior to the PC slowdown, intel did have a profitable quarter in the Comm Group, what was formerly called "other". In a period in which Intel's PP&E is generating 25% less revenue, Intel is claiming that the value of that PP&E is 20% greater than it was the year before. The present economic conditions are extreme, and it is reasonable to think they will improve, and that the revenue Intel's PP&E will generate will increase next year, but it would take a 60% increase in revenue to account for the difference in valuation. ---Property Plant And Equipment should go up. intel opened a new fab in Arizona F22, using part of that 7.5B in Capital expenditures this year. Probably spent quite a bit outfitting that D1C 300mm Fab in Oregon too. This 2.3B Fab, and the 300mm expansions, most likely accounts for the increased PP&E. Nothing unusual at all... My own interpretation is that the fierce competition with AMD, coupled with permanent reduction in demand relative to 1999 (no more Y2K looming over the horizon), resulted in a chunk of Intel plant becoming worthless and Intel being forced to replace that plant ahead of schedule. Those were real costs they incurred and they covered those costs with real money, but they didn't include those costs in their earnings calculations. ---More likely, the 0.25u Fabs have dumped P3, and been converted over to Manufacturing Willamette and/or the lineup of i845/i850 chipsets. Maybe even be a few Mobile P4's coming.... who knows? Compare that with AMD's accounting, where they performed a physical and accounting restructuring this quarter, taking as costs this quarter expenses that won't be incurred until next quarter. AMD wrote down the value of its old plant and took costs for closing it. AMD has also been depreciating their current plant as rapidly as they've been spending on it. By taking costs as they are incurred, and writing down plant as worthless as soon as it becomes worthless, AMD is in a better position to report profits when the semi market picks up. Intel, on the other hand, will first have to own up to the costs of its acquisition binge and the fact that some of its old plant has also become worthless. ---The thing is, intel's plants are not worthless. What they ARE is.... Already Paid For. intel's 0.25u Fabs are still Class 1 State Of The Art Facilities, and if the future does turn around, those Fabs will be there in reserve, ready for conversion. In the meantime, they can crank out all the P4's and Chipsets that intel's heart desires. Also, In the meantime, a brand new F22 can crank out all the Northwoods and Tualatins that anyone's heart desires. :-) Semi

To: Dan3 who wrote (146182)	10/29/2001 12:03:07 AM
From: BelowTheCrowd	Respond to of 186894

> In a period in which Intel's PP&E is generating 25% less revenue, Intel is claiming that the value of that PP&E is 20% greater than it was the year before. < The only way that they can increase the value of the PP&E is if they actually invest money in it. PP&E, like most other assets, can be depreciated and can be written down to reflect market values, but it CANNOT be adjusted upwards. "Lesser of Cost or Market" is a pretty well understood and well-enforced fact of financial accounting. The reason PP&E is worth more than it was a year ago is that they spent more money on new PP&E than they depreciated away. Scroll through their financials to look at the selected cash flow info. $1.3b this quarter, $2.1b last quarter, etc. All this adds to the value of PP&E. I agree with your concern about the huge goodwill on the books. I suspect that it will be gradually written down over time and that all this will impact earnings, but your point about PP&E is pure BS. mg

To: Dan3 who wrote (146182)	10/29/2001 7:41:13 AM
From: Dave	Read Replies (2) \| Respond to of 186894

Dan, In previous posts to you, I have discussed depreciation and amortization. First and foremost, both depreciation and amortization are non-cash charges. That dollar amount for PP&E was spent previously. When a company puts depreciation and/or amortization on its Income Statement, the company didn't spend any money that quarter. For some reason, you continue to look @ INTC without your rose colored glasses on, however, you continue to look @ AMD with them on. Again, Depreciation and Amortization are non cash charges.