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Personal Computing
Posted at 9:40 p.m. PST Tuesday, February 9, 1999
Intel tries its hand again in
the poker game of prediction
BY ADAM LASHINSKY
Mercury News Staff Writer
YOU know a company is clicking on all cylinders when it can
afford to joke about its own deficiencies. Consider the
self-deprecating tone at Intel Corp. (Nasdaq, INTC), the world's
leading maker of microprocessors.
Intel's no failure, of course. But it doesn't always achieve its
publicly stated goals. One result, acknowledges Intel Chief
Financial Officer Andy Bryant, is that investors can become
confused.
But make no mistake. Even when Intel slips, it's probably not
down for long. First case in point is Intel's prediction at the
beginning of last year's fourth quarter that it would cease to lose
market share for chips that go inside low-end personal computers.
At one point in mid-1998, rival Advanced Micro Devices Inc.
(NYSE, AMD) had more than half the market for chips in sub-$1,000 computers; by year's end,
AMD had dipped slightly but still comfortably outpaced Intel.
''We didn't do a particularly good job'' of coming back, says Bryant, crediting AMD with
better-than-expected competitive juices. Then, at the beginning of this year, Intel promised again it
would 'take back the low end','' says Bryant, in between speeches at Goldman, Sachs & Co.'s
annual technology conference in New York. ''And that appears to be working.''
Note that Bryant isn't confirming five weeks into the quarter that Intel's Celeron chip is winning the
low-end PC battle. He's merely reacting to AMD's warning it may lose money this quarter
because of stiff price competition from Intel. But Bryant isn't embarrassed to point out that Intel
doesn't always get the forecasting game right.
So he doesn't blame Wall Street for not always trusting Intel's projections, including its forecasts
on profit margins. After all, Intel has ''pre-released'' three of its last six quarters, meaning its
late-quarter view of its business changed from its early-quarter outlook about half the time over
the last 18 months. Intel's shaky forecasting tells an interesting tale. When it was rapidly taking
market share, Bryant says, its shipments were a function of how many chips it could build.
Therefore, the company often knew exactly what its shipments would be, even without a good
window on industry demand. ''Now we're just one of many trying to guess what (demand) will
be,'' Bryant says.
The five-year-veteran CFO also is aware that Intel has yet to deliver on a promised large-scale
acquisition strategy. The company has said it's on the hunt for networking-related investments. So
far it has settled only on a relatively small purchase last year of a Danish networking company and
the pending buyout of Shiva Corp. (Nasdaq, SHVA) for $180 million.
''Certainly our intention is to use some of our cash to be more aggressive with acquisitions,'' says
Bryant. Intel had $7.6 billion in cash at the end of the fourth quarter. He says that coming
investments will focus on Europe and Hong Kong. But he's mum on whether or not there's a
billion-dollar deal in Intel's future. ''Don't think so much in terms of dollars as technologies,'' he
says, repeating Intel's mantra that it wants to invest in companies that make PCs easier to use.
Intel's shares fell $6.69, or 5 percent, to $125.31 in Tuesday's tech-stock sell-off. The stock is
still worth nearly double the 52-week low it hit last June.
NOTABLE ONE-LINERS: Despite the sell-off -- typical behavior at the early-February
Goldman conference -- investors and executive were full of good cheer and pithy observations
about tech stocks.
A sampling: Michael Dell, asked why Dell Computer Corp. (Nasdaq, DELL), for all of its
e-competence, can't report earnings more quickly the way Cisco Systems Inc. (Nasdaq,
CSCO) has begun to do: ''I'm going to ask my CFO when I get home.''
Goldman, Sachs enterprise software analyst Rick G. Sherlund, on his pitch to Web-oriented
clients who'd rather speak to his Internet-analyst colleagues than his team: ''We're Internet
analysts, too.''
Famed ''value'' investor William H. Miller III of Legg Mason Fund Advisor Inc., comparing his
funds to many technology investors in attendance: 'For us to sell something three years after we
bought it is like flipping an IPO.' ''
(That's the practice of institutional investors who immediately sell shares of hot initial public
offerings.)
Hedge-fund manager and TheStreet.com founder James J. Cramer, on America Online Inc.
(NYSE, AOL): ''I think all they want to do is dominate the world.''
BRIGHT LIGHTS, DATALESS CITY: You used to be a paper person. You recorded your
contacts and stored business cards on a Rolodex. Two of them. Your appointments resided in a
leather-bound Filofax that you carried everywhere. You once even printed out an itinerary for a
business trip to New York on a plain piece of 8-by-11-inch paper.
Life was simpler then. Now you keep every scanned business card, appointment and random
thought on your PalmPilot. You didn't even scribble down the telephone number and address of
your Monday morning appointment. The information, after all, was safely and efficiently stored in
your electronic gizmo and backed up on two PCs in California.
That didn't help you much when you dropped the PalmPilot Sunday evening and the device
stopped working. Just like that. For the first time in a year, you were calling switchboards to get
the numbers of big-shot executives in Silicon Valley and influential analysts in New York whose
direct lines are -- were? -- in your palm-sized device. It didn't help either that you couldn't figure
out how to connect to the Internet from your fancy new notebook computer. These ''tools'' were
supposed to make your life easier.
Defeated, you wander into a computer retail store. There you're greeted by a person, a New
Yorker, who asks, ''Did you hit the Reset button?'' The PalmPilot works again. Another kind soul
demonstrates that your modem also works just fine when hooked up to an analog phone line
instead of the digital line you tried earlier.
Grateful to be plugged in again, you might resolve to copy more items into paper files. Or to rely
less on e-mail. But you don't. You resolve instead to put your PalmPilot data onto one of those
networked calendar services and to troubleshoot new equipment next time before leaving town.
You've changed.
Contact Adam Lashinsky at the San Jose Mercury News, 750 Ridder Park Drive, San Jose,
Calif. 95190, or siliconstreet@sjmercury.com or (408) 271-3782.
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