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.

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

To: Mary Cluney who wrote (48382)	2/21/1998 8:38:00 PM
From: Paul Engel	Read Replies (1) \| Respond to of 186894

Mary - Re: "...how do you account for Intel's historic low valuation? " I have no definitive answer to this - it has been debated endlessly. One item some people look for in investments is the long term predictability and stability of a company's revenue and profits. Although Intel has done well over a long period of time, occasionally (remember last May 31?) business situations develop and Intel's revenue growth is abruptly changed - for the worse. Occasionally, (Fall, 1996) their revenue growth shoots through the roof. This lack of consistency probably doesn't sit too well with some investors. Early in 1997, the spectre of AMD's K6 hovered over Intel, drastically dumping Intel's share price until July. The spectre of of cheap PCs also threatens (*?) to drastically cut Intel's ASPs, and profits. Basically, Intel has to keep proving again and again that it can succeed despite these continual assaults and threats. Eventually - and it may be years from now - Intel will be unassailable due to their present and future size and manufacturing and technology capabilities. Today, they are still seen as vulnerable to technological displacement. Once it dawns on investors that nearly unlimited amounts of money and the best management available cannot be assembled and still compete successfully with Intel, their "franchise" will be recognized as nearly unassailable. Perhaps then you will get the P/E ratio you seek. I hope it isn't too long from now. Re: "How come they do not have analysts covering their business that project an air of authority sufficient to undermine managements' guidance and suggests they (the analysts) know things that management doesn't?" I think this is lowly starting to happen. The best evidence I saw was at last November's analyst meeting where Intel stood up and described their vision of business conditions. They were challenged by analysts and directly stated that they, INTEL, were in charge and knew more about business conditions than the analysts. The most telling was a question by Jonathan Joseph (Montgomery) addressed to Paul Otellini concerning sub $1000 PC, I believe. Otellini flat out stated that Intel was dominant in this role and making money and was certainly in no way backing off from this market segment - and would GOOD MONEY from it. Moreover - Craig Barrett paraded in front of these same analysts Intel's defect densities for it's technologies - including current 0.35 micron and 0.25 micron processes - denoting that INTEL would be the mass producer of high performance devices - uninterrupted. Their yields are and will be so good to keep their costs down, allowing Intel to participate in, and make excellent money in, the sub $1000 PC segment. The startling thing about this was that the analyst meeting took place one day after these same analysts were treated to a meeting by Sanders at AMD when he admitted AMD was STILL having yield problems. Three months later they appear to still be in deep doodoo. Net result - Intel blew away analysts with their Q4 earnings performance. Little by little, Intel is emerging from this engineering driven dynamo to become a market driven dynamo - guys like Otellini representing Intel will help. He's slick - real slick. The engineering mentality needs to allow the marketing and PR groups to take some control and exert influence over analysts. It is starting to occur, but it is a big cultural change for Intel. Paul