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To: SusieQ1065 who wrote (56615)	6/7/2002 6:31:14 PM
From: SusieQ1065	Respond to of 208838

INTC making transition from "Growth" stock to "Cyclical"..does not deserve such high valuation.. excellent read... 13:17 ET 6/6/02 Intel (INTC) 22.11 -4.89: If you watch the markets everyday, it's easy to get caught up in the mood of the moment and miss the big picture. That has been the case with Intel all year, as the stock did well early in the year on healthy Q1 sales and is getting hammered today on a less healthy Q2 outlook. Investors who are not predisposed to buying and selling a stock every few weeks could benefit from a longer term perspective on Intel. One of the most basic distinctions in the equity world is between cyclical stocks and growth stocks. As the name implies, a cyclical company sees its revenues go up and down with the overall business cycle, with very little secular growth outside of that cycle. A growth stock may still be affected by the cycle, but its revenues exhibit a strong secular growth trend. For obvious reasons, growth stocks are rewarded with higher valuations than cyclical stocks. Classic cyclical stocks such as machinery, airlines, and autos are lucky to fetch forward P/Es in the double digits. Take, for example, Caterpillar (CAT). It is one of the better cyclicals, with a P/E of 14.6. Between 1997 and 2001, CAT managed to grow its revenues by 8.1% - not bad, but certainly consistent with the type of slow growth that we associate with a cyclical company. Over that same period, INTC managed revenue growth of 5.9%, and is looking at another year of only modest growth in 2002. Yet CAT's P/E on 2003 estimates is 14.7 and INTC's is almost double that at about 27. Every large cap cyclical stock was once a growth stock - you don't get from zero to billions in revenues without being a growth company at some point. From an investment perspective, it is important to determine the point at which a growth business has matured into a cyclical business. It is arguably the case that the PC sector generally and INTC specifically have reached that point. PC penetration into homes and businesses has plateaued, processor speed is no longer a key issue for PC users, and vicious price competition is a fact of life. It is not surprising that Intel's revenues have flattened in this environment. What is surprising is that investors still - even after today's rout - are rewarding Intel with a growth stock valuation. Intel's 2002 revenues will be only modestly above those of 1997 and earnings will likely be lower, but Intel's market cap is 88% above its level at the start of 1997. Maybe INTC has not travelled all the way from growth to cyclical just yet, but its valuation appears to reflect little risk that such a transition will occur at all. - Greg Jones, Briefing.com