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To: Steve Lee who wrote (12)	12/2/2001 9:16:12 AM
From: orkrious	Read Replies (2) \| Respond to of 238

Steve, that was a superb, articulate post. I have been saying for about 6 months that Intel's fortunes may turn upwards and give a false hint of a recovery. That would be a nice shorting opportunity. Just so I understand what you are saying, the "process improvements" you discussed would increase margins, not sales, correct? Consequently, INTC's EPS will be increasing, but not their sales, which really give a more accurate picture of the state of the industry. Further, all this really says is that their yields are going up, which means there will be even less need for additional capital equipment. Am I correct? ork

To: Steve Lee who wrote (12)	12/2/2001 2:31:45 PM
From: Robert Scott	Respond to of 238

I'm going to respond to your response later today but I thought you might be interested to know that "IT" will be disclosed on Monday. dailynews.yahoo.com

To: Steve Lee who wrote (12)	12/3/2001 6:13:03 AM
From: Robert Scott	Read Replies (1) \| Respond to of 238

1. Competition is indeed a force to lower prices but is this necessarily bad? It has been proven that most technology products are elastic - that is, lower prices increase demand which lower margins but increase profits - it's a positive correlation, not a negative one. Now I am talking in general - there certainly are hiccups and companies and products that fail. Also newer products, which are increasingly being offered on shorter development timeframes, applying Moore's law drive margins higher shortly after ramp. 2. I agree that some companies upgrade in 4 or more years but I think the Y2K issue will cause a different scenerio this time because so many companies purchased product in 1998 and 1999. This will certainly smooth out over time but I can imagine a spike in late 2002 and through 2003. 3. As far as a demand/capacity issue for this recession vs the 1990/1 and 1982/3 ones, this one is playing out in much the same fashion generally. All the production and other statistics say that we haven't seen these levels for 10 or 20 years (ie since a recession). Actually, I think this recession is different in the sense that demand for technology products has actually fallen - not just overcapacity (ie built too much) or price erosion. This is the first time in many, many years if ever that PC growth is negative. In other words, there is a component of overcapacity that is being driven by a lack of demand - this is very unusual in recent history for technology products. So you have a lack of demand, over building and price erosion to contend with. What is amazing to me, however, is that there are many, many companies whose revenues have fallen significantly (many around 50%) in less than a year that are still profitable - that is very unusual. It shows that American companies can respond very quickly to events without significant stress on their balance sheets. This bodes well for the recovery. In sum, I don't want to sound too rosy here because there certainly will be challenges but on the other hand, it's not doomsday either. Robert Scott maximuminvesting.com