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To: Bill Fischofer who wrote (131345)	6/6/1999 1:09:00 AM
From: Tony Viola	Respond to of 176387

Bill, The reason for INTC's relatively low valuation is that INTC must invest billions each year to support its investment cycle. Most folks know about "Moore's Law" which states that the number of transistors on a chip doubles every 18 months. But Moore also has a "second law" which states that the cost of a semiconductor fab doubles for each generation of chips. Despite INTC's position as the dominant semiconductor company, these huge (and growing) investments result in the market demanding a higher "risk premium" (i.e., lower PE) than alternative investment which do not have such capital requirements. What happens when practically no other semiconductor company can afford the escalating cost of fabs, and no company that could afford to, like IBM, wants to buy any of the smaller semi companies because of the cost drag? Can't Intel, who can afford to keep going, then grab a much bigger piece of the pie, and even raise prices again? Tony