All, summary of the past week...
techweb.com
Intel's Roller-Coaster Ride: All In
The Game?
(06/05/98; 9:19 a.m. ET)
By Gabrielle Jonas, TechInvestor
The bad news came fast and furious for Intel this week,
sending the stock to its lowest point in a year. There is
plenty to be worried about -- from the delay of the
Merced chip to possible antitrust allegations to a
slowdown in chip sales -- but there is still no consensus
on Wall Street.
The shock treatment began Wednesday, when
Hambrecht & Quist analyst Rob Chaplinsky trimmed his
earnings estimates to 65 cents per share from 69 cents
for the second quarter, which ends June 30, and lowered
his fiscal 1998 earnings outlook to $2.92 per share from
$3.04. The downgrade even sent shivers through the
Asian markets.
"If you do the work, you come to the same conclusion:
Things aren't strengthening at Intel," Chaplinsky told
TechInvestor. "PC OEMs [original equipment
manufacturers] are still trying to work down inventories,
and we're into a seasonal slowdown."
Hambrecht & Quist has kept its buy rating because of
the low share price, but Chaplinsky recommended
waiting for second quarter earnings, due out in mid-July.
That sent Intel [INTC] shares down 5 percent
Wednesday.
One day later, Ashok Kumar of Piper Jaffray started
coverage of the shares with a buy rating and an $85
price target. On the strength of that start, Santa Clara,
Calif.-based Intel (company profile) posted a partial
recovery, regaining about 3 percent to close up 2 1/4 to
68 3/16.
But David Wu of ABN Amro is skeptical about both
analysts' assessments. "Just before the quarter is over,
everybody gets very excited, and people make some
change in estimates one way or the other to get their
customers' interest up," he said.
Wu has not budged from his second quarter earnings
estimate of 70 cents per share since April. Although the
chip maker's major customers are reducing inventory in
the channel, he said, things are looking up for the third
quarter. He said he expects sequential revenue growth
between 5 percent and 8 percent.
But the third quarter is typically stronger than the second
quarter, so it is nothing to get excited about, said Kumar.
In addition, he said, assurances from Intel's largest
customers, such as Compaq, do not carry much weight
as far as projections are concerned.
"Compaq -- that's a disaster zone," Kumar said. "I don't
want to blow the trumpet, but if you look at the data
points on Intel, it either comes out of Rob [Chaplinsky] at
Hambrecht & Quist, or myself."
Chaplinsky, naturally, agreed. "If analysts did the work
and didn't just call one or two customers, but talked to a
lot of components suppliers and systems vendors,
Taiwanese motherboard vendors and resellers and
retailers, they'd come to the same conclusion."
Piper Jaffray is estimating second quarter revenue of
$5.5 billion, and Hambrecht & Quist is looking for $5.8
billion. "It will come out somewhere between," Kumar
said. He said he is forecasting the same 70 cents per
share Wu is, while more pessimistic analysts expect 62
cents a share.
In the short term, Intel looks weak, Kumar
acknowledged. In the first quarter, Intel's market share
for microprocessor architecture peaked at 90 percent.
"We believe when they exit the fourth quarter, it will be
at 85 percent," he said. Last year, Intel grew its unit sales
at 21 percent; this year, he expects something closer to 9
percent.
Despite Intel's problems, Kumar said he expects the
second quarter to go out with a bang. "The quarter is
very back-end-loaded," he said. Monday, Intel is
expected to announce price cuts for several desktop
product microprocessors, which he said he believes will
spur some demand.
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