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Technology Stocks : CYRIX / NSM -- Ignore unavailable to you. Want to Upgrade?

To: Paul Engel who wrote (26280)	5/1/1998 3:08:00 AM
From: FJB	Read Replies (2) \| Respond to of 33344

Paul, Are you sure you aren't being a little agressive regarding Intel's product timeline. I know you probably have better info than LB, but there is a major discrepancy between your roadmap and Intel's public roadmap. Katmai a lot sooner than the end of '98 on your roadmap: Message 4277526 Mendocino apparently on the verge of release(hinted): Message 4279351 You may have caught Cyrix stockholder fever! Expecting products sooner than they will actually appear. :-) lehman.com Here's what LB says about the roadmap and Intel doesn't usually fib to analysts: 4/21 DURING MARKET HOURS INTC HOSTED AN ANALYST UPDATE. KEY NEWS INCLUDES: 1) Process technology continue to run ahead of schedule, 2) INTC is enjoying exceptional success in the server market, 3) China and India are particularly robust, 4) Celeron sales are expected to be strong in 2H98, 5) New inventory management systems, 6) Hot new software will drive the market in 1999 demand high horsepower processors, 7) Katmai is coming mid-'99, 8) Merced is coming mid '99, 8) Ongoing inventory corrections will hurt 2Q98 performance, as expected, 9) The long term strategy is unchanged: 1 bil. connected PCs, 10) The Pentium 2 architecture is "winning", 11) Inventory corrections will continue into 2Q98. ADDRESSING THESE ISSUES IN SLIGHTLY MORE DETAIL: 1) PROCESS TECHNOLOGY IS AHEAD OF SCHEDULE. The most advanced process typically wins. INTC plans to have 100% of is microprocessors sold in 4Q98 based on 0.25 micron technology, about 3-5 months ahead of the schedule we saw a year ago. Also, 0.18 micron is now scheduled to come to market by mid 1999. 2) INTC IS ENJOYING EXCEPTIONAL SUCCESS IN THE SERVER MARKET. INTC since 1Q96 has enjoyed a 38% cagr for units; the market was 13%. Intel architecture now accounts for about 90% of the 650K servers shipped per quarter. 3) CHINA/INDIA ARE STRONG. Both countries appear to be up at least 30% in unit volume and on a 28-29% 5-year compound growth path. 4) CELERON WILL BE STRONG IN 2H98. Intel intends to move the speed to 300 MHz by year-end (and add 128K integrated cache) and 333 MHz by 1H99. 5) NEW INVENTORY MANAGEMENT SYSTEMS ARE IN PLACE. Intel demo'd that its new on line purchase system has been leveling the order process. 6) HOT NEW SOFTWARE WILL DRIVE THE MARKET. Intel in particular demo'd "Chrome", a web management system, and 2 ultra real games. The point is, Intel believes this software will create new users, and the software was pushing the current generation processors to the limit. 7) KATMAI IS COMING MID '99. Katmai adds 70 new video processing instructions to accelerate digital imaging applications. 8) MERCED IS COMING MID '99. The Merced adds 64 bit processing and will take performance to a new level. 9) THE LONG TERM STRATEGY IS UNCHANGED: 1 BILLION CONNECTED PCS. We believe that is a good strategy and will happen. 10) THE PENTIUM 2 ARCHITECTURE IS WINNING. Intel will ship more Pentium 2 units in April than Pentiums for the first time, and Taiwan motherboard production of Pentium 2 architectures will exceed the Pentium by May-June. 11) THE INVENTORY CORRECTION IS ONGOING AND WILL CONTINUE TO IMPACT 2Q98 RESULTS. This speaks for itself. Obviously, there has not been a significant change in business for the better during the past few days or weeks. POINT 10 (THE INTEL PLATFORM IS WINNING) IS WORTH UNDERLINING. THAT STATEMENT MAY BE A FACT NEXT YEAR, BUT, DURING THE NEXT 6 MONTHS, IT WILL LIKELY JUST MAKE THE COMPETITION ALL THE MORE FEROCIOUS. Intel indicated Taiwanese motherboard makers will be at a monthly run rate making more Pentium 2 than Pentium motherboards by June. Given Intel's success in logic chips and graphics accelerators, the challenges in front of the competition will become more intense. But, short term, it likely actually put more pressure on pricing. One vendor today is offering 200 MHz Pentium-MMX machines for $599. IN SUM, WE ADD THESE 11 POINTS UP AND THEY SILL SUGGEST NEAR TERM CAUTION ON INTC (AND THE X86 MARKET IN GENERAL). AMD likely fully converts to 0.25 micron production a few months ahead of Intel. The server market is not big enough to alone justify a positive stance on Intel (about 5% of the market now going to close to 15% during the next 5 years). Similarly, China and India combined at about 4 mil. PCs last year are too small to determine the total PC market. Celeron may be strong in 2H98, but, the competition is clearly better positioned to ride this booming 25%of the unit volume (10-15% of the dollar volume); low end PCs and competition go together and are a key cause of the unusual pricing and product introductions which have so badly disrupted the market this year. New inventory management may lessen future swings, but the systems have not eliminated the cause of the current excess inventory. Most of the hot new software demo'd didn't actually work and did not seem to be killer apps (a key Intel manager actually said to me that, with prices falling and a lack of new software, now is a great time NOT to buy a PC). The introduction of Katmai and Merced in mid-'98 are not going to help the market now. The long term strategy won't change the short term challenges. And, yes, the inventory correction is ongoing, so don't look for a good 2Q98. POSITION UNCHANGED: CAUTIOUS, SPRING FEVER NOTWITHSTANDING. Chip investors have spring fever. Stocks are up, fundamentals down. Intel appears to face particularly large challenges with the move downward in pricing for the sweet spot of the PC market due to the emergence of competition. It is tough for us to see how margins go up near term. With lackluster near term sales and margins under pressure, EPS likely will be soft. We continue to prefer more profitable companies (or those with a margin uptrend). LB on National NSM ANNOUNCES $60 MIL. ONE-TIME CHARGE FOR MAY FY4Q98 REDUCING EPS BY $-0.27 TO $-0.32. (THERE WILL BE A SMALL AMOUNT OF TAX CREDITS TO OFFSET THE WRITE-OFF). These write-offs primarily reflect past actions. NSM previously indicated R&D and SG&A would be cut by 10%. Additionally, NSM continues to restructure and rebalance its manufacturing base. Write-offs include $20 mil. for severance payments (i.e. to reduce R&D and SG&A), $10 mil. to end miscellaneous R&D projects (i.e. to reduce support of non-X86/Cyrix desktop architectures), and $30 mil. for various manufacturing rebalancing items (i.e. shut down 5-6 Santa Clara lines, write-down of R&D equipment, write-down of .65 micron Texas line). OUR CURRENT ESTIMATES EXCLUDE THESE ONE-TIME CHARGES. CURRENT ORDERS ARE AT THE LOW END OF EXPECTATIONS. NSM is still marching toward its May FY4Q98 guidance of a 10% decline sequentially in sales and operating EPS at $-0.20. However, there is no order visibility beyond 4-8 weeks at most. NSM was hoping to begin to see good orders pushing into the June/July timeframe, but this has not happened. NSM IS MARGINALLY MORE CAUTIOUS ON PROSPECTS MOVING FORWARD.