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

To: Paul Engel who wrote (53246)	4/15/1998 1:55:00 AM
From: TTOSBT	Read Replies (1) \| Respond to of 186894

Paul Re: >"He also said he did not anticipate the much-publicized inventory glut of finished systems at resellers would hamper IBM's ability to move new systems through."< The talk is already starting to isolate the inventory glut to the soon to be outdated chips and models. Isn't this the way it always goes? Or am I being too simple here? TTOSBT

To: Paul Engel who wrote (53246)	4/15/1998 1:51:00 PM
From: Maverick	Read Replies (2) \| Respond to of 186894

Intel stalls, part II As a result of these problems, revenues will be flat to slightly lower in Q2 vs Q1, which virtually guarantees that year/year revenues will post a second straight decline. More bad news: increased costs related to the transition to Pentium II (and specifically, its SEC cartridge) will reduce margins by another "few points" from the already disappointing 54.2% Q1 level. Put it all together and you come up with Q2 earnings estimates that are likely to settle in the $0.70 area, down from a First Call estimate of $0.75 and way down from the year-ago EPS of $0.92. That will mark three consecutive year/year declines in earnings -- a first this decade. To fully appreciate how bad this looks, check out the two charts below -- the first is year/year revenue growth for Intel, the second is quarterly earnings per share; both include Q2 estimates based on Intel's guidance. Either way, it's not a pretty picture. The Second Half This is where Intel bulls will have a field day. We can hear it now: Intel sees margins rising in the second half, Intel sees sequential revenue growth returning in the second half, Intel announces its new Celeron chip, and so on. Here's our problem with his bullish spin. First and most importantly, let's note that Intel almost always posts sequential revenue growth in the second half. So far in the 1990s, Intel revenues have fallen in just 1 of 8 third quarters and have averaged 4.7% growth, and they have never fallen in the fourth quarter, averaging gains of 11.9%. Saying that sequential revenue growth will return in the second half is hardly good news -- had they projected flat revenues, Intel would have been a $30 stock in a hurry. Even with sequential revenue increases in Q3 and Q4 which match the 1997 comparables of 3.3% and 5.7%, Intel's Q4 revenues would still be down 1% year/year, and with lower margins, earnings would almost certainly continue to decline year/year as well. This hardly sounds like a high tech growth company. Intel gave no sense of how big the second half revenue gains would be, and given the first half disappointments, caution is certainly warranted. Intel apparently thinks so, as it announced job reductions of 3,000 and lowered its capital spending and R&D plans by a cumulative $500 mln for 1998.