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: Jacob Snyder who wrote (60511)	7/16/1998 7:22:00 AM
From: Tobias Ekman	Read Replies (1) \| Respond to of 186894

Good questions. I cannot answer them, but hope somebody will??? All I know is Intel is above 84$ this morning and thats really nice. This should be good for amat too, no?? 7.5% up since yesterday. wow. Regards Tobias

To: Jacob Snyder who wrote (60511)	7/16/1998 9:31:00 AM
From: Jeff Fox	Read Replies (4) \| Respond to of 186894

Jacob, re: Intel earnings: can someone explain I will give it a shot: 1.did they beat estimates or not? Most analyst believe that Intel met 2Q earnings expectation. Andy stressed several times that the quarter happened in line with prior guidance. 2.what, exactly, is an inventory writedown? 3.why does it decrease earnings? 4.why do you have to do it when you succeed in cutting costs? Intel uses conservative accounting. For one this means that they value their inventory at current manufacturing cost. Andy announced that Intel exceeded expectations on cost reduction, which is very good news and should cause increased fear and despondance at Intel's competitors. Lower cost means either better future margins, or alternately that Intel can offer even lower prices at today's margins. The latter means continuing great profits at Intel and even deeper losses at competitors. The lower cost means that Intel has lowered the value of its inventories. This loss of value becomes a one time charge against Q2 earnings. The analyst discount this charge as it is not something that reflects on future and not something that was included in the analyst estimates. If you back out the charge, then earnings are equivalent to $.70 per share - two cents above avr. expectations. 5.why will it be "one-time"? Is he saying Intel will never cut costs again, or never have another inventory writedown, or future writedowns won't affect earnings, or what? Good question... Intel writes down inventory every quarter. The company has a track record of continuing cost reduction for processor manufacture. This "normal" rate is built into the calculation for expected earnings. What Andy announced is exceptional cost reduction over and above the expected performance. This "extra" effort is the news. 6. So......INTC's earnings were cut because the company got more efficient.....somehow, that doesn't sound quite right. Of course, I'm not an accountant....... Life's a #%ich, ain't it? Actually it is nothing to worry about. Intel essentially gets this benefit back in the succeeding quarters as they will sell this "cheaper" inventory at new cheaper prices. They will be able to show good margins while expanding the market and making life "difficult" for its competitors. This is conservative accounting, but is the best way to do it at a company that is always reducing prices. 7. I remember a statistics class, a long time ago, where the professor said: "some numbers are made out of rock, and some are made out of jello. Learn to tell the difference." What are these numbers made of? Made of Rock Jeff