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To: Trey Yon who wrote (1672)	12/30/1997 12:40:00 PM
From: Trey Yon	Respond to of 2694

Headline: Semiconductors: Chip Price Survey Author: M. A. Gumport, CFA 1(212)526-5368/C. Gangi -3754/T. Berg -5276 Rating: Company: AMD,ALSC,AVT,IDTI,INTC,LSCC,MU,NSM,STM,TXN,VTSS,XLNX Country: IND CUS Industry: SEMICO Today's Date : 12/23/97 ------------------------------------------------------------------------------ * 16 MBIT DRAMS DROP SHARPLY. ------------------------------------------------------------------------------ 16 MBIT DRAMS DROP 10% AGAIN. The crisis in Asia-Pacific is still leaving commodity DRAM makers most exposed. Our spot market survey finds 16 Mbit DRAMs 10-15% below a week ago. Additionally, our sources are now indicating 16 Mbits priced as low as $1.40-1.75. 4 Mbit graphics DRAMs (256K x 16s) are the one bright spot and now actually are priced above 16 Mbit chips. Micron (MU-$26 1/4-1) is most exposed to the negative near term trends of DRAMs. Alliance (ALSC-$4 3/4-1), too, faces near term losses, but ALSC is better able to benefit from the uptick in graphics DRAMs. Also, we note ALSC's joint venture partnership value of at least $10 per share will be realized in the coming year. Integrated Device Tech. (IDTI-$9 25/32-1) promises a very important series of new product diversification announcements in early 1998 which should dramatically reposition the company, including an entry into the 60% gross margin CPLD market. PROCESSORS: PRICES WAR??? Last week we noted that Advanced Micro Devices' (AMD-$18 9/16-1) K6-233s were available in volume and, consequently, K6-233 prices fell and Pentium 2-233s followed suit. THIS WEEK WE NOTE P2-233s HAVE FALLEN ANOTHER 20% TO WELL BELOW LIST. WE REMAIN CAUTIOUS ON INTEL (INTC-$71 7/16-2). OVERVIEW - STILL BAD NEWS NEAR TERM: 1) DECELERATION, 2) ASIA/PACIFIC. EXPECT TURNAROUND IN EARLY 1998 WITH ACCELERATING GROWTH THROUGH THE YEAR. We continue to see 2 short term themes: 1) Deceleration, 2) Asia/Pacific. Deceleration is apparent in National Semiconductor's (NSM-$26 7/8-1) slowdown from 40% to 8% year-over-year order growth Aug. - Nov. (or the peaking of worldwide IC unit growth at 35% last July; latest data shows 24% growth in October). Asia/Pacific's impact is apparent directly in the bankruptcy of Lattice's (LSCC-$54 1/4-1) key disti. in Korea and indirectly in the flood of low priced DRAMs as sales to Asia/Pacific are redirected to the U.S. Our EPS projections remain at the low end of the street and still appear somewhat optimistic. Companies with lowest Asia/Pacific exposure are Vitesse (VTSS-$38 1/4-1), Xilinx (XLNX-$35 3/4-1), and Avnet (AVT-$66 3/4-1), among our favorites. We believe the strongest current fundamental story in our universe is VTSS; longer term, despite current soft results at XLNX and downward revisions at LSCC, we believe these 2 companies have a particularly bright outlook over the next year. Among larger stocks, we believe ongoing long term improvement argues in favor of positions in Texas Instruments (TXN-$46 1/8-1) and SGS Thomson (STM-$59-1). WHILE CHIP STOCK PRICES LIKELY WILL STILL BE DECLINING SHORT TERM, NOW THROUGH EARLY 1998 APPEARS AN OPPORTUNITY TO ESTABLISH MAJOR POSITIONS AT VERY ATTRACTIVE PRICES. (Cont'd) Chip Prices (Cont'd) p.2 AICE PRICE SURVEY 12/22 -------% CHG VS.------- 12/22 1WK 2WK 1MO 64MBITS Sync 4Mx16 $22.60 0.0% 0.9% -13.1% Sync 8Mx8 $22.49 4.2% -2.5% -22.9% Sync 16Mx4 $23.97 -11.3% -1.1% 0.0% 4MX16EDO $24.45 0.0% 0.0% 0.0% 8MX8 $19.07 -2.2% -10.3% -15.0% 16MX4EDO $15.59 -21.5% -23.6% -30.5% 16MX4 $20.51 0.5% -3.1% -8.6% 16MBITS Sync 1Mx16 $3.47 4.4% 4.4% -18.2% Sync 2Mx8 $2.35 -22.9% -30.3% -41.5% Sync 4Mx4 $4.36 -3.9% -5.1% -2.7% 1Mx16 EDO $2.71 -3.6% -6.6% -21.5% 1Mx16 $2.65 -5.7% -9.0% -30.3% 2Mx8 $2.71 -15.1% -15.1% -32.9% 4Mx4 EDO $2.33 -15.0% -23.5% -35.4% 4Mx4 $2.59 -12.1% -23.9% -33.2% 4MBITS 256Kx16 $2.08 0.0% -7.3% -10.2% 1Mx4 EDO $0.77 -19.5% -19.5% -25.0% 1MX4 $1.02 0.0% -28.4% -35.4% JAPAN 11/26 -------% CHG VS. ------ 16 MBIT/4 MBIT 1WK 2WK 1MO PRICE STATUS 1Mx16 EDO $2.80 -3.4% -3.4% -33.8% Down 1Mx16 $3.10 -10.4% -10.4% -26.7% Down 4Mx4 EDO $3.10 -10.4% -10.4% -24.4% Down 4Mx4 $3.10 -10.4% -10.4% -24.4% Down 1MX4 $0.95 -5.0% -5.0% -13.6% Down SPOT LIST --------% CHG VS.-------- PENTIUM SURVEY (AICE)12/22 10/26 1WK 2WKS 1MO. P2-300 $745 $738 1.2% 1.2% -1.6% P2-266 $498 $530 -2.0% -2.0% -5.4% P2-233 $306 $401 -20.0% -20.0% -24.3% P6/Pro-200 (256k) $485 $487 -3.0% -3.0% -3.0% P55C-233 (MMX) $289 $300 0.0% 0.0% -0.5% P55C-200 (MMX) $211 $213 -1.0% -1.0% -1.7% P55C-166 (MMX) $110 $145 -11.1% -11.1% -11.1% P54C-200 $143 $125 -13.4% -13.1% -29.3% P54C-166 $ 96 $106 -15.1% -15.1% -21.5% K6 (ESC* -small lots) K6-233 $221 $225e -2.6% -12.7% -36.0% K6-200 $173 $160e -1.0% -4.4% +1.5% **e- assumes a 25% discount to Intel Pentium/P55C processors. Disclosure Legend: A-Lehman Brothers Inc. managed or co-managed within the past three years a public offering of securities for this company. B-An employee of Lehman Brothers Inc. is a director of this company. C-Lehman Brothers Inc. makes a market in the securities of this company. G-The Lehman Brothers analyst who covers this company also has position in its securities.]

To: Trey Yon who wrote (1672)	12/30/1997 12:44:00 PM
From: Trey Yon	Read Replies (1) \| Respond to of 2694

Headline: Intel Corp: Mixed News - Price Cut Confirmed; 4Q EPS to Meet Guidance Author: M. A. Gumport, CFA/C.Gangi 1(212)526-5368/3754 Rating: 2 Company: INTC Country: EPS CUS Industry: SEMICO Ticker : INTC Rank(Prev): 2-Outperform Rank(Curr): 2-Outperform Price : $70 3/16 52wk Range: $102-52 Price Target: $ 90 Today's Date : 12/24/97 Fiscal Year : DEC ------------------------------------------------------------------------------ EPS -1996-- -----1997-------- -----1998------- -----1999------ QTR. Actual Prev. Curr. Prev. Curr. Prev. Curr. 1st: 0.51A@* 1.10A* 1.10A* 0.90E 0.90E 1.05E 1.05E 2nd: 0.58A* 0.92A 0.92A 0.95E 0.95E 1.10E 1.10E 3rd: 0.74A* 0.88A 0.88A 0.95E 0.95E 1.10E 1.10E 4th: 1.06A* 0.86Ex 0.88Ex 1.00E 1.00E 1.20E 1.20E ------------------------------------------------------------------------------ Year: $ 2.90A@* $ 3.76Ex* $ 3.78Ex* $ 3.80E $ 3.80E $4.45E $ 4.45E Street Est.: $ 3.82E* $ 3.80E $ 4.28E $ 4.11E $4.60E $ 4.66E @-Includes 1Q96 $-0.01 inventory write-down; -Split adjusted; x-4Q97 excludes $-0.06 in process R&D write-off for anticipated acquisition. ------------------------------------------------------------------------------ Net Cash per Share : $5.62 Revenue (1997) : $25.0 Bil. Return On Equity* : 34.6 % Proj. 5yr EPS Grth : 15.0 % Shares Outstanding(z): 1797.0 Mil. Dividend Yield : 0.2% Mkt Capitalization : $126.1 Bil. P/E 1997; 1998 : 18.6x; 18.5X Book;Price/Book : $11.42/sh;6.14x Convertible : None Disclosure(s) : C Puts in Equity unexercised; z-Share equivalents ------------------------------------------------------------------------------ ** MIXED NEWS: 12/29 PENTIUM 2-233 PRICE CUT CONFIRMED; 4Q EPS TO MEET GUIDANCE ------------------------------------------------------------------------------ THE BAD NEWS: MANAGEMENT CONFIRMS PRICE CUTS DUE 12/29 AND 1/23. In discussions yesterday, management indicated that customers were informed quite some time ago that price cuts on the Pentium-2 (P2)-233 would be brought in from the end of January to the end of December. Management also indicated the move was in response to customer requests to accommodate a build to order model with faster new product cycles. Rumors on unannounced price cuts and deals have circulated for the past month, but this is the first confirmation we have had from management. We saw spot prices for the P2-233 drop 20% during the past week from $375 to $306; they declined another 1% yesterday to $302 (range: $290-314). We show Intel's last list price 11/1 at $401 for parts with 256K cache; the spot market price we track purports to be for parts with 512K of cache. WE BELIEVE THE PRICE CUT LARGELY REFLECTS THE FACT THAT AMD-$17 15/16-1 IN THE PAST 2-3 WEEKS BEGAN DELIVERING VOLUME QUANTITIES OF K6-233s. STILL, AT THIS DATE, THESE CUTS HAVE NO IMPACT ON 4Q RESULTS, AND OUR MODELS ALREADY ASSUMED THE P2-233 WOULD BE CUT TO $270 AT THE END OF JANUARY, SO THE ONLY REAL NEWS IS THE TIMING OF THE CUTS. THEY UNDERLINE A MORE COMPETITIVE PRICING ENVIRONMENT AND THE FACT THAT, TO SOME DEGREE, PRICING LEVERAGE HAS SHIFTED FROM THE SELLER TO THE BUYER. THE GOOD NEWS: TIMING OF 0.25 MICRON TRANSITION APPEARS TO HAVE ACCELERATED BY 3-6 MONTHS AT INTEL, SLIPPED 3 MONTHS AT AMD. Intel management indicates the move to 0.25 micron will be nearly complete by year end 1998. That is about 6 months earlier than the apparent schedule 6/3/97 at their analyst meeting. AMD, meanwhile, had been scheduled to be 100% 0.25 micron my mid-1998, but we guess that has slipped by 3 months. So AMD has gone from a (Cont'd) INTC (Cont'd) p.2 claimed lead to claimed parity. THE REAL BATTLE IN 1998 WILL BE INTEL's PUSH TO 0.25 MICRON P2 SLOT 1 CHIPS VS. AMD's 0.25 MICRON K6 SOCKET 7. ALL THAT CAN BE SAID AT THE MOMENT IS THAT AMD IS STILL IN THE RACE. FINE TUNING 4Q EPS UP (STILL BELOW CONSENSUS); NO CHANGE IN 1998. Intel recently entered its quiet period still indicating it was on track to meet 4Q guidance of some sales growth, flat gross margin, 10-15% increase in operating expense, $160 mil. in other income, and a 35.5% tax rate. Intel throughout 1997 has beaten its operating expense estimates, so there is again some upside opportunity from control of this item. We assume 5% sales growth, flat gross margin, and 12.5% growth in operating expense (slightly higher sales growth than previously) and estimate 4Q EPS at $0.88 (old: $0.86) vs. consensus of $0.90. We continue to estimate 1998 at $3.80, 1999 at $4.55. VIEWPOINT: THE BIG DROP IN INTEL's STOCK PRICE IN RECENT MONTHS IS CLEARLY BUILDING A VALUE STORY. NEED SOME MOMENTUM. DON'T REALLY SEE IT NOW. At roughly 3.5x a market sales multiple and 1.1x a market multiple of book, Intel is in the lower third of its historical range. We also believe Intel merits selling in a higher range than the one it has recently enjoyed. Technology stocks, however, need momentum, and we just do not see that now. The principal issue at Intel during the past 9 months has been the reemergence of competition and a consequent much more competitive pricing environment which has pushed gross margins down. Asia-Pacific is also an issue, though the impact of that is less clear currently (30% of Intel's sales are into Asia-Pacific, but about half of that is reexported). WE SEE COMPETITION AS THE KEY NEAR TERM DETERMINANT OF MOMENTUM AND STOCK PRICE. WE REMAIN CAUTIOUS NEAR TERM. ------------------------------------------------------------------------------ Disclosure Legend: A-Lehman Brothers Inc. managed or co-managed within the past three years a public offering of securities for this company. B-An employee of Lehman Brothers Inc. is a director of this company. C-Lehman Brothers Inc. makes a market in the securities of this company. G-The Lehman Brothers analyst who covers this company also has position in its securities.