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: James B. Ditsworth who wrote (67324)	10/25/1998 2:44:00 PM
From: Alain Dubreuil	Respond to of 186894

Some other comments from Value Line We have raised our 1998 and 1999 share-earnings estimates for Intel Corporation by $0.30 and $0.25, respectively. These adjustments stem primarily from favorable trends exhibited in the recently completed quarter. A pickup in demand permitted a modest profit gain in contrast to the declines in the previous three periods. There was solid growth across practically all product lines and markets, with the exception of Japan (which does not come as much of a surprise). Of particular note during the period were the successful introductions of the high-end Pentium II Xeon processors and the low end Intel Celeron processors. The Celeron offering has appealed especially to a sizable price-conscious niche of the personal computer market. Intel has also done a good job lately keeping costs under control. The gross margin percentage was 53% for the third period, up from 49% sequentially (but down from 58% a year ago). This figure should hold close to the current level in the near term, thanks to a decent product and geographic mix, coupled with added manufacturing efficiencies. The company will likely show year-to-year improvement, as well, in terms of operating expenses. Since the end of the first quarter, it has lowered its headcount by roughly 2,000 people (about 3%). This number is apt to approach 3,000 employees by yearend. Intel holds our highest rating for Financial Strength. Debt to total capitalization remains low and cash flow substantially exceeds needs, especially considering management's recent decision to curtail plant expenditures. Intel is thus well equipped for future expansion efforts. Furthermore, the company is well diversified geographically, meaning it is not hampered excessively by ongoing economic difficulties in Japan and other areas. Intel's stock price has pretty much held its own over the past three months, something that cannot be said for a lot of the companies in this industry. The issue has been spared somewhat from the weakness faced by the overall equity markets. However, solid share-net growth projections and appreciation prospects out to 2001-2003 appear to already be largely discounted in the current quotation. Oscar L. Vidal October 23, 1998

To: James B. Ditsworth who wrote (67324)	10/25/1998 2:47:00 PM
From: Mary Cluney	Read Replies (4) \| Respond to of 186894

James, Joe Arena in the High Tech Arena newsletter date October 17, that you cite, makes a good case for selling his Intel holdings of five years, in May, from a cost basis of $6. His main points, however, have been discussed ad nauseam on this thread for quite some time now: 1. Increasing competition from AMD, Cyrix, et al. 2. Lower ASP and reduced earnings growth. 3. Future uncertainty in the high end server market due to delays in Merced development. Going forward, I think all three reasons he provides have been discounted in the market place. I don't think anyone will be surprised if AMD captures a larger market share and that ASP may go down further. The way I see it, Craig Barrett has set himself up where he could surprise mostly on the plus side - barring developments in the macro international economics. On these threads in SI, we all know the hazards of betting on AMD to deliver anything - but in the general market place - there is probably perception that AMD is a new comer and gaining market share is an inevitability and therefore see nothing but decreasing ASP and lower earnings growth for Intel. But the general market may not be as aware of the current server market opportunities without Merced as many of us are aware of here. Similarly, even though ASP may indeed go down, something tells me that earnings growth can surprise the general market. I think that Craig Barrett has only scratched the surface of lowering costs of production and general overhead (SG&A expenses). Indeed, in addition, there is a lot of room for him to take some pages out of Lou Gerstner's book to show earnings growth - although I don't think he has to resort to that level of desperation to raise stock prices. Finally, the bet is, and always will be, about the future. I think, Joe Arena describes best what that future opportunity is when he stated: >>>If Intel's execution in the server and workstation business is flawless, it can easily be argued that double digit earnings growth will return. The server business should represent about $63 billion in revenue by 2002, according to Dataquest. Intel's share of this business should increase to the range of 70-75%. Over the next few years, more than half of Intel's growth is expected to come from penetrating the high-end server and workstation markets. However, the delay of Merced underscores the difficulty that Intel may face attempting to penetrate this segment.<<< IMO, that is the opportunity and that is the bet. The risk reward ratio looks pretty good. Mary