Re: Miner's statements, here's the full article, Brookwood is all gaga over the K-7, (not to mention Whistler Comunications and Cobalt networks!!!)
Intel May Get Pummeled from Unlikely Sources
By Marcy Burstiner
Staff Reporter
1/6/99 4:47 PM ET
SAN FRANCISCO -- The Marriott hotel in downtown San Francisco is filled
this week with Steve Jobs disciples attending MacWorld, but in a small room on the
fifth floor of the same hotel, executives from Intel (INTC:Nasdaq) laid out a
strategy of how the chip maker plans to reign over the technological world. Not just
PCs, but servers, workstations and just about every machine that computes and
processes data will boast of Intel inside.
Conspiracy theorists might wonder at the timing and setting, but John Miner, vice
president and general manager of Intel's Enterprise Server Group, insisted the Intel
gathering was purely coincidental.
Still, the message out of Intel's two-day press briefing was, Forget the Mac hype;
the techno-future belongs to Intel. On the low end, the company will crush
Advanced Micro Devices (AMD:NYSE), on the high end it will crush Sun
Microsystems (SUNW:Nasdaq). Apple Computer (AAPL:Nasdaq) was barely
worth mentioning.
Hearing Intel execs tell it, the company has no worries. "The march has begun,"
Miner said. He described his company's Xeon chip for servers as the backbone of
Web companies. This top-line chip will be the engine of the e-commerce world, he
said.
Miner suggested that it is just a matter of time before Sun Microsystems will put
Intel chips in its servers and workstations in place of its own UltraSparc chip,
because customers will demand to move from Sun's proprietary technology to the
all-pervasive Intel architecture.
Look at the numbers, Miner said. According to International Data, Intel now
takes a 10% market share for servers that cost between $50,000 and $100,000,
but that share will increase to 58% within four years. And it has a 40% market
share now for servers that cost between $25,000 and $50,000 -- a share that will
grow to 70% in four years. Below $25,000 it already holds 80% of the market.
Unlike the desktop PC market, servers mean high profits for Intel since it will be
selling its top-line Xeon, priced at $3,600 each. This is one area where Intel's
fabulous margins can be maintained.
Analysts such as Morgan Stanley Dean Witter's Mark Edelstone share Miner's
confidence that the company can eat market share in the high-margin market.
Edelstone is convinced that Intel, which closed at 123 1/4 Tuesday after a 60%
price run-up in three months, could rise to $150 within the next 12 months.
(Morgan Stanley is an underwriter for Intel.)
Wait just one minute, said Nathan Brookwood, an analyst at Insight 64 who
compiled similar numbers while previously at Dataquest. Intel's rivals are gearing
up to challenge the Santa Clara, Calif., giant. The anticipated entry of AMD into the
server market, which plans to release the K-7 chip later this year, could change all
the projections. K-7 is rumored to be better than any chip that Intel has on the
market and will be sold at a discount to Intel's.
AMD already rules the low end of the desktop market and will likely continue to do
so despite new price cuts on Intel's Celeron and Pentium II. AMD's K6-3 chip
(nicknamed Sharptooth), to debut later this month, is already faster than Intel's
fastest desktop chip, the 450-MHz Pentium II, Brookwood said. Investors too
have given AMD a vote of confidence, pumping up the stock from a mere 14 on
Oct. 8 to 32 on Dec. 8, an increase of 128%. AMD stock closed lower at 27
11/16 Tuesday.
Besides AMD, there are some small up-and-coming players in Silicon Valley,
Brookwood says, such as Whistler Communications and Cobalt Networks who
are selling low-priced high-performance servers for Intranets and the Internet that
aren't beholden to the Intel.
So while Intel is confident it can displace competitor Sun Microsystems at the top
end, it is facing challenges from unexpected quarters.
For more info on institutional holders of these stocks, as well as financial
statements and earnings estimates, please see the Thomson Company Reports.
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