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

To: GVTucker who wrote (178715)	7/16/2004 5:26:04 PM
From: rkral	Read Replies (1) \| Respond to of 186894

GVTucker, I'm still trying to understand all the ruckus over the $427MM increase in inventory during the most recent quarter. After all, that's only 5% of the quarter's revenues ... as someone else on the thread pointed out. But it occurs to me that inventory is valued at cost. At a typical gross margin of 60%, doesn't this mean at least $1 billion (~=$427MM/0.4)of revenues will be required to deplete that $427MM of "excess" inventory? It also occurs to me that the 2.5x multiplier is really only appropriate for $157MM increase in finished goods inventory. The multiplier for the $230MM work-in-progress ("WIP") portion would be somewhat higher ... as additional costs will be incurred before WIP becomes finished goods. I haven't a clue as to how much higher. In this light, I better understand Andy Bryant's statement that (paraphrased) "working off the excess inventory will require 6 months". Your corrections and comments appreciated, Ron

To: GVTucker who wrote (178715)	7/17/2004 7:26:42 AM
From: Amy J	Respond to of 186894

GV, RE: "The inventory hasn't caused a demand worry. It has caused a margin worry. Most every analyst who upgraded this stock last year did so because they thought that margins had risen to a new level. That is apparently not the case. A lot of that increased margin has translated into inventory. Note that management guided margins lower for the rest of the year. Also note that the analysts have adjusted revenue expectations upward, showing that they believe management's demand expectation." Okay got it now, thanks for explaining this item. (But I still disagree with how you think Intel got into a situation of excess inventory - you think it's due to managing GM, while I believe the company's stated reasons, that it's due to bringing a new line on.) I'll agree that Intel fumbled on its GM estimate, because if they backed out their 15% excess of inventory, the GMs still should have been target. While I agree it's poor appearance to have an incorrect GM estimate in the face of excess inventory, I think there's a distinction between appearances and intentions - the excess inventory is due to yields, not managing GM. Btw, glad WS believes there's increased demand. Earnings still look mixed to me. There are certainly conflicting undercurrents of a recovery in various sectors. Regards, Amy J