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

To: Kirk © who wrote (44425)	1/8/1998 12:12:00 PM
From: Paul Dieterich	Read Replies (1) \| Respond to of 186894

Lehman on Intel: ------------------------------------------------------------------------------ ** 2-OUTPERFORM RATING MAINTAINED; EMERGING VALUE STORY; ANOTHER SLIP BY COMPETITORS WOULD BE THE BEST NEWS (WE DON'T SEE THAT NOW). ------------------------------------------------------------------------------ 2 RATING MAINTAINED. In 1998 we view the X86 market as likely to be increasingly competitive. That competition makes us relatively cautious with regard to any focus position on this market sector. WE SEE MIXED NEWS FOR INTC AND OUR POSITION REMAINS RELATIVELY CAUTIOUS. On the positive side, a strong value story is certainly emerging: Relative sales multiples (among the most consistent valuation indicators) are now in the lower third of their historical range. Also, Intel is pushing the technology ahead as fast as possible and, if anything, is ahead of schedule on the critical 0.25 micron conversion. Still, we remain concerned that the strong market share gains and lack of competition which drove margins and stock performance up now have reversed. From 1994 through early 1997 INTC's X86 dollar volume market share rose from 87% to 95% (unit volume share rose from 74% to 86%); both dollar and unit share fell about 3 points during the past year and customers seem eager to find alternative x86 suppliers. Market share erosion appears paralleled by gross margin erosion. There is a clear shift among consumers towards lower cost PCs, and in that sector competitors are strongest. We believe so long as INTC is giving up share and watching gross margins drift lower, its stock will still be selling at better values. Consensus at $4.11 for 1998 appears somewhat optimistic. We remain cautious near term and rate the stock 2. THE SINGLE MOST IMPORTANT EVENT WHICH WOULD INSPIRE US TO AN IMMEDIATE UPGRADE WOULD BE NEWS OF FURTHER, SERIOUS PRODUCTION PROBLEMS AT AMD-$20 -3.