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Politics : Ask Michael Burke -- Ignore unavailable to you. Want to Upgrade?

To: Knighty Tin who wrote (43091)	1/12/1999 6:26:00 PM
From: Timothy Liu	Read Replies (1) \| Respond to of 132070

So for you, why not short DELL since that looks like a sure bet according to your theory. Tim

To: Knighty Tin who wrote (43091)	1/12/1999 8:15:00 PM
From: Earlie	Read Replies (3) \| Respond to of 132070

MB: Haven't had much time to post of late, but with pre and post Christmas field work starting to quiet down, and INTC's Q4 release at hand, a few observations might be in order. First of all, as I noted earlier, this past quarter witnessed a remarkable "over-ordering" of chips by the box builders and a consequent massive over-build of PCs. We expected and stated that chip UNIT sales would be up in Q4 as a result of this and they were. Candidly, I expected the price reductions to show up more than is apparent in Intel's Q4 numbers, but in a way, it doesn't matter,...the real problem lies in the fact that there is a great deal of PC inventory out there, demand is stagnant and the box builders won't be ordering a bunch of chips until this stuff gets moved. Earlier, I suggested that 1998 global unit sales of PC's would likely come in close to those of 1997 at just over 85 million units and that actual PC revenues would be mildly negative on a year-over-year basis. I have encountered nothing to suggest that this expectation will be far off the mark. Q4 unit sales in N. America may end up a bit higher than we expected (due to severe price cutting and Greenspan's Christmas gifts to the markets and to borrowers) but Asian and Latin American sales appear to have been squeezed a bit more than we had projected, so it may just be a wash. The point for us is that there is nothing to suggest that global 1999 PC unit sales will rise (no new applications, plus the fact that Latin America is about to join the growing ranks of those with a reduced interest in PC purchases). I'd love to examine any data that supports any form of PC growth for 1999, (whether unit or revenue). AMD has already grabbed a ton of market share from Intel and is not going to quietly steal away into the night. AMD's production capacity is growing. AMD's growth, plus a non-growth PC market as well as a big inventory hangover, bodes ill for Intel's Q1 revenues. With respect to inventories, at the retail level, many stores actually experienced greater PC unit sales in the week after Christmas than in the week preceding. Except in carriage trade environments, retail sales remained fairly quiet right up to the week before Christmas, then blossomed as deep price cuts took hold. Unfortunately, inventories remained excessive after Christmas, so most retailers bit the bullet and really whacked pricing. More price cutting will be required as January sales have been extremely slow in the aftermath of this extravaganza and inventories are still excessive. Corporate sales, as you noted, are giving the resellers fits. Intel stated that Q1 revenues and margins are expected to be down "due to seasonal factors". A nice touch and does what is required, which is to get expectations down. Incidentally, a quick peak at Intel's Q4 to Q1 profit numbers over the last few years suggests that this "seasonal' thing relates to the channel stuffing that has shown up only in the last year or two...... 1993 to 1994.....$0.33 to $0.35 1994 to 1995.....$0.39 to $0.48 1995 to 1996.....$0.49 to $0.51 1996 to 1997.....$1.07 to $1.10 1997 to 1998.....$$0.98 to $0.91 In the previous five years, only last year witnessed a profit reduction from Q4 to Q1, and that related to the aforementioned massive stuffing of the channel. The company is cutting capital expenditures by 25% in 1999. (Hello out there all you Amat buyers). Down a billion. This makes sense in a declining demand environment. Intel spent big bucks buying Shivas, Dec's micro production facilities (chuckle, chuckle) and Micron stock (note "Long Term Investments" rose from $1.7 billion to $5.3 billion). The former two, particularly Shivas, no doubt enhanced the company's Q4 revenues. Too bad we can't shake those numbers out to calculate the actual internal growth or lack thereof. Cash is disappearing. $10 billion a year ago, now $7.6 billion, but what can one expect given the IBM-like share buy-back program. I note that the company spent roughly HALF of the last 9 year's worth of share buy back money during 1998 this past year. This is obscene. As you stated, the year wasn't a barn burner with profits down 13% on a mild rise in sales of 13%. Thank goodness the analysts are predicting big gains this year (g). As an aside, how did you like the "feet-to-the coals" treatment of Kurlak? Got to hand it to Tom for "sucking it in" via an "accumulate" rating (yawn) in spite of the enormous pressure. He knows what is coming. (g) Best, Earlie