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To: jim kelley who wrote (118730)	4/19/1999 12:39:00 PM
From: Mohan Marette	Respond to of 176388

Jim:Speaking of INTC,this is what S&P has to say-Earnigs a disappointment,HARDLY Thursday April 15, 1999 (4:45 pm ET) Tech.Knowledge: Intel's First Quarter Report a Disappointment? Hardly The chip giant's sales are still healthy despite price wars and the switch to Pentium III By Megan Graham-Hackett, S&P Computer Hardware, Networking & Semiconductors Analyst NEW YORK, Apr. 15 (Standard & Poor's) - You wouldn't know that the tech sector's expected EPS growth of roughly 30% for Q1 is still on track by looking at the stock performance of the group in the past week. The best example is Intel (INTC; S&P STARS ranking , or buy), which reported Q1 1999 EPS after the market's close on Tuesday, April 13, of $0.57 versus $0.36 in the year ago period. This was a 57% increase in net income! Moreover, despite worries earlier in the quarter that Intel's price war for low end chips put profits at risk (click here to see a related story), the company's gross margin was a whopping 59% -- pretty close to Intel's all-time high of about 64%. Sure, revenues came in a little light -- but just 2% below expectations at $7.1 billion and still up 18% over a year ago. The figure is fairly impressive given the rapid transition to the company's new Pentium III chip. The chip was priced aggressively compared with the Pentium II. In fact, some industry analysts declared the Pentium II dead. Now realize that the Pentium II is Intel's mainstream chip, and is the highest volume microprocessor in the world. Given this fact, coupled with the significant price cuts in the second highest volume chip, Intel's low-end Celeron, and the fact that PC shipments were only supposed to grow about 14% in Q1, and the quarter's 18% revenue growth starts to look pretty good. We would remind investors that the same way Intel can grow profits pretty nicely in a market with enormous pricing pressure holds true for computer hardware makers. Intel's price cuts, afforded by significant reductions in manufacturing costs and technology advancements, are sold to PC makers. PC makers are benefiting from the lower price of this major component, but also are taking significant costs out of their business models. This is not to say healthy technology demand will lift all boats. The aggressive pricing environment does mean there will be haves and have-nots and we believe investors should look to leading technology companies with key competitive advantages: Intel (manufacturing prowess), Dell (DELL; ) (singular focus on direct business model, superior execution, low cost producer), and IBM (IBM; ) (unique e-commerce capabilities, leads in new technologies in several key component areas) are just a few.