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

To: Scumbria who wrote (70194)	12/24/1998 7:11:00 AM
From: TCGNJ	Respond to of 186894

Thread, "Kurlak Flip-Flops on Intel" smartmoney.com TCG _______________________________________________________ December 23, 1998 Kurlak Flip-Flops on Intel By Karyn McCormack IF YOU CAN'T beat 'em, join 'em. That's apparently what longtime chip-stock bear Tom Kurlak has concluded about Intel (INTC). After completely missing the giant chipmaker's 78% rise this year, Merrill Lynch's highly-regarded chip analyst switched course on Wednesday and -- citing the tremendous popularity of the Internet -- reversed a negative opinion he's had about Intel since August 1997. The stock immediately soared 5% to a new 52-week high of 125. Kurlak raised both his long-term and near-term ratings on INTC shares to Accumulate from Neutral, and said the company's fourth-quarter earnings could easily come in higher than his estimate of $1.03 a share. For 1999, Kurlak boosted his earnings forecast by 18% to $4.25 a share and hiked his revenue estimate by 8% to $30.35 billion. Those number represent 29% and 17% growth from his respective 1998 projections for earnings and revenues. For Kurlak, who didn't return phone calls, the move has to be embarrassing. "In the course of just the past 11 weeks, the stock has appreciated by 60% while we have remained cautious," he was forced to admit in his research report. "He's been very negative on [Intel's] valuation and the [chip] sector," says Art Hogan at Jefferies & Co. "He's finally throwing in the towel." Kurlak, of course, looked very right on Intel through much of the year. As the shares sank 30% this spring amid pricing declines and Asia-related gloom, the controversial analyst had already weighed in with concerns that Intel would suffer from both an oversupply of chips and the advent of the sub-$1,000 PC. Those factors did conspire to drop Intel's average selling price by 15% this year, which in turn drove gross margins as low as 49% -- a steep decline compared to historical levels closer to 65% What Kurlak failed to see, however, was how much the Internet and e-commerce would support PC demand. While he had predicted the growth of sub-$1000 PCs would displace sales of more expensive machines that use Intel's high-margin chips, that hasn't happened. Instead, people are buying more of all types of machines. "Internet commerce is quickly taking off and most households and businesses will find they need to participate," Kurlak writes. He sees Intel selling 112.5 million chips in 1999, a 22% rise from this year. That's slightly higher than his 1998 unit-growth forecast of 20%. And while Intel's average selling price is down about 15% from a year ago, he now thinks it will fall only 3% to 5% annually going forward -- a sharp reversal from his earlier prediction of an 8% to 10% decline. The reason is higher prices for Intel's Xeon chips for high-speed servers and better-than-expected sales of Pentium II chips for medium-range machines. Lower-priced Celeron chips have also been selling well, but the richer mix will produce revenue growth in the mid-teens next year, Kurlak says, rather than the 9% he had been forecasting. At the same time, Intel has reduced costs. For instance, when Intel launches its 0.18 micron processor, the company plans to reuse 70% of the capital equipment it used to produce its 0.25 micron processor. That will knock 30% off spending next year, plus depreciation. The result should be better profitability, Kurlak says. He predicts gross margins will rise to a steady rate of 55%, as much as 5% higher than his earlier estimate and last quarter's level. Despite the recent jump in Intel stock, Kurlak insists it isn't overvalued. "The stock is trading at 28 times our new 1999 earnings estimate, which, given today's market environment and low bond yields, is not considered expensive," he writes. He thinks the stock could rise another 15% to 144, and carry a PE of 34, if the market doesn't fall. All this optimism doesn't mean Kurlak is sprouting bull horns on the entire chip sector. On Tuesday, Kurlak spurred a 4% decline in the shares of memory chip maker Micron Technology (MU) after saying it would continue to lose money as it increases production next year.

To: Scumbria who wrote (70194)	12/24/1998 12:14:00 PM
From: Paul Engel	Read Replies (1) \| Respond to of 186894

Scumbria - Re: " I see things a little differently from you. " I see Intel at $125 3/8. You have been blowing AMD's and Cyrix's and IDT's horn for over a year or more. I'm sure you see them differently from me as well. In the meantime, Intel - the company - is doing great. By the way - do you really think Intel isn't working on geometry/set up engines in their newer graphics developments? Keep thinking that. And you keep seeing things differently. And I'll keep investing in Intel and watch it grow. And GROW ! And GROW ! Paul