Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Politics : Stockman Scott's Political Debate Porch -- Ignore unavailable to you. Want to Upgrade?

To: TigerPaw who wrote (11848)	1/15/2003 7:40:09 PM
From: stockman_scott	Respond to of 89467

Kurlak is long KLIC Intel's Margins Underscore Its Franchise Strength By Thomas Kurlak Special to RealMoney.com 01/15/2003 06:58 AM EST Click here for more stories by Thomas Kurlak Intel's (INTC:Nasdaq - news - commentary - research - analysis) fourth quarter looked good. Revenue grew 11% sequentially, about 4% more than recently revised Street estimates. And gross margin, as I expected, jumped by nearly 3 points to 51.6% from the third quarter. Earnings of 16 cents a share were up 45% over the third quarter. That Intel still can earn a 15% net profit margin in this economy is testimony to the strength of its franchise and business model. And that franchise is even stronger, as Intel's market share hit a five-year high at year-end. Microprocessor average prices (for use in PCs) were up in the fourth quarter, despite Street analysts' claims of weakness and oversupply. And with the introduction of several newer processors, such as the Centrino, which incorporates wireless capability, average prices are likely to trend upward this year. I continue to expect 2003 earnings of 80 to 85 cents a share and Q4 '03 earnings to reach an annualized rate of $1.13. (And I expect Intel's stock to provide an above-average return this year.) Management's first-quarter outlook statement of sequentially flat-to-slightly-down revenues leaves room for improvement at the midquarter update and is characteristically subdued, which is smart at this stage. But a new head of steam is building, and one quarter this year (I don't know which), Intel is going to blow away the revenues and put to rest the issue of whether a new cycle has started. Bears will explain away their low earnings miss this quarter by saying it was a seasonal blip. And that Q1 also can't be trusted as a guide of business trends because a reorder surge won't be sustained in Q2. But unlike last year, the economy is heading upward, and semiconductor capacity utilization is back up from 50% to 75%, making it a tighter chip market. And those PCs keep getting older while businesses and consumers are using them more. Bears also will say that Intel's planned lower capital spending is a negative because it reflects less optimism about the future. But what it really says is that Intel has enough plants for growth of output, and now depreciation charges will start to decline, which helps earnings. For the semiconductor-equipment companies, lower capital expenditures is a nonevent and should not be a reason to sell those stocks (those who did after hours will eventually regret it). In fact, Intel's capital spending on actual production equipment probably will be up 20%; it's the spending on land and buildings that will be down. And as far as I know, Applied Materials (AMAT:Nasdaq - news - commentary - research - analysis) doesn't sell buildings. Anyway, it's irrelevant because equipment stocks track semiconductor stocks, and investors expect their earnings to lag the cycle. Obviously, a better outlook for Intel has to be good for Applied Materials. The market always looks ahead. That is the problem with the bear case: It has failed to anticipate change, and has used current trends last fall to support a negative view when indicators of impending improvement were developing. I base my bullish long view on the fact that semiconductor usage always grows. What creates problems are recurring inventory cycles that come along when producers least expect it. Those inventories are gone now and demand is picking up for PCs, cell phones and even telecom equipment. To me, the outlook for the PC sector is bright. This should lead to better times for lots of tech companies, not just Intel. I don't see much analysis of the fact that the U.S. won the PC war, and now it's a U.S. oligopoly made up of Hewlett-Packard (HPQ:NYSE - news - commentary - research - analysis), Dell (DELL:Nasdaq - news - commentary - research - analysis) and Apple (AAPL:Nasdaq - news - commentary - research - analysis). The Japanese have no real position. Price wars don't help gain share like they did before. And surveys show that consumers still rely on their PCs more than any other tech product, including cell phones. -------------------------------------------------------------------------------- Tom Kurlak is the former semiconductor industry analyst for Merrill Lynch, now retired. For 19 consecutive years, Kurlak was on the Institutional Investor All-Star Team until his departure for Tiger Management in February 1999. At the time of publication, Kurlak was long Applied Materials, Intel, National Semiconductor, Kulike& Soffa, Nokia and Western Digital, although holdings can change at any time. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Although he cannot answer questions about individual securities, Kurlak appreciates your feedback.

To: TigerPaw who wrote (11848)	1/17/2003 12:39:35 AM
From: stockman_scott	Read Replies (2) \| Respond to of 89467

Off the Wagon By PAUL KRUGMAN Columnist The New York Times January 17, 2003 Picture a recovering alcoholic falling off the wagon. First he says he can handle a few drinks. Then, when his inebriation can't be denied, he insists it's only a temporary lapse. But eventually he turns mean. "What's so great about being sober?" he growls, reaching for another bottle. As a drunk is to alcohol, the Bush administration is to budget deficits. During the 2000 campaign George W. Bush often pledged to maintain fiscal responsibility. Right up to the passage of the 2001 tax cut his people said they could cut taxes, pay for new programs like prescription drug coverage, and still pay off most of the federal government's debt. As soon as the bill passed, those rosy budget projections fell apart. Then came Sept. 11. "Lucky me, I hit the trifecta," declared Mr. Bush, claiming — falsely — to have said during the campaign that his budget promises didn't apply in the event of recession, war or national emergency. But until this week officials insisted the deficit was temporary. Now the budget director, Mitch Daniels, has admitted the obvious: The federal government faces the prospect of large deficits as far as the eye can see. And sure enough, the drunk has turned mean. As the administration reaches for another bottle — another long-term tax cut for the affluent — its officials sullenly denounce the "fixation" on budget deficits, dismissing it as nonsensical "Rubinomics." (So much, by the way, for the war on terror as an excuse for deficits. "What did you do in the war, daddy?" asks Ronald Brownstein in The Los Angeles Times. "I got a big tax cut, and passed the bill on to you.") Economics aside, the administration's ever-changing rationale for tax cuts says a lot about its character. If the Bush team never cared about deficits, Mr. Bush's promises of fiscal responsibility were dishonest. On the other hand, if administration officials didn't decide that deficits are O.K. until that belief became convenient, that suggests that they're tough talkers who make excuses when confronted with real problems. That's a scary thought; is this the kind of administration that would, say, call North Korea names and talk about pre-emptive war, but back down and offer aid when the country actually threatens to restart its nuclear program? Nah, couldn't happen. The administration's top economist certainly changed his mind about deficits very late in the game. Glenn Hubbard, chairman of the Council of Economic Advisers, recently denied that deficits raise interest rates and depress private investments. Yet Mr. Hubbard is also the author of an economics textbook; as Berkeley's J. Bradford DeLong points out on his influential Web site, the 2002 edition of that textbook explains how, yes, deficits raise interest rates and depress private investment. There's a reason Mr. Hubbard said what he did in his textbook. When the government sells bonds it competes with private borrowers. By the usual rules of economics, this competition should, other things equal, drive interest rates higher and investment lower. There are exceptions to economic rules, but someone who suddenly discovers such an exception at the precise moment his political masters need a cover story isn't credible. Will this alcoholic eventually go back on the wagon? Not for a while; he has too many enablers. The Congressional Budget Office will soon start using "dynamic scoring" to assess proposed tax cuts — that is, it will build in the supply-side assumption that tax cuts raise the economy's growth rate, and therefore generate indirect revenue gains that offset the direct revenue losses. In the past, budget officials have opposed this practice, because it's so easy to slide from objective analysis into wishful thinking. With Republicans controlling both the White House and Congress, does anyone doubt that future C.B.O. analyses will take a very favorable view of big tax cuts for rich people? It's O.K. to run a deficit during a recession, as long as the deficit is clearly temporary. But both the numbers and the administration's search for excuses tell us that there's nothing temporary about the red ink. On the contrary, we'll probably be on a deficit bender until the baby boomers retire — and then it will get much worse. Trust me: we're going to miss Rubinomics. Maybe not today, and maybe not tomorrow, but soon, and for the rest of our lives. nytimes.com

To: TigerPaw who wrote (11848)	1/17/2003 8:22:16 AM
From: stockman_scott	Respond to of 89467

Goldman gets 'cautious' on enterprise software sector By Tomi Kilgore CBS MarketWatch 7:48am 01/17/03 (IBM, MSFT) Goldman Sachs analyst Rick Sherlund lowered his rating on the enterprise software sector to "cautious" from "neutral," on the belief that much of the fourth quarter's good news is already reflected in the stock price, given that the stocks have risen sharply off their October lows and since the end of 2002. He noted that the firm's recent information technology spending survey showed IT budgets down 1 percent for 2003, but expectations call for revenue growth in the technology sector of about 6 percent. "We had hoped that Microsoft and IBM would show greater upside and give a boost to sentiment in the tech sector, but expectations appear to have already gotten too far ahead of the fundamentals," Sherlund said in a note to clients.