Intel Corp (INTC)

[fingolfen]

I am fully invested in stocks too. Bulk of it in Intel (worked there for a long time). The best it did in the last up cycle is $28? This stock was at $26s in 1997. You can take a 2 year span and feel better (BTW, 1 year doesn't look that great either), but with all the competive egde, I expected lot more.

I am very dissappointed in the returns (dividend and cover calls helped) in a timespan when CPU sales have grown significantly. I think it either ignores competition in their core business (under Barrett) and then does just the opposite - too much focus on AMD.

Looking a 1997, you're in the middle of a market that somehow thought that Pets.com warranted a market capitalization in the many billions. Intel was caught up in (and smacked down by) the dot-com bust.

Also if you look at Intel's CPU offerings over time - in 1999 you get the coppermine P3 which couldn't compete with the K7 without outrageously priced memory and lacked its headroom. The P4 helped... a lot... but while the top bin of P4 could compete against the top bin of K7, the clock-for-clock comparison was poor as the P4 had to run at a much higher frequency to do it. The Northwood P4 on the 0.13u copper technology gave Intel some breathing room... until K8 came around... then there was the Prescott fiasco where the stock suffered and deservedly so.

There were also product delays, product cancelations, false starts in several side businesses and continuing losses in Flash even with the NAND venture and repeated promises to make Flash profitable.

So yes - from 1999 to roughly 2005 Intel stock was basically treading water... I played a lot of the dips, and made some money at it. Since the introduction of the Core 2 architecture and the final spin off of Flash, the last two years is really the first time in a long time that Intel seems to be executing like "the old Intel". Fewer miscues, stronger products, products that live up to the billing, and the stock has done well relative to the market.

However, Wall Street has a long memory. For those two years they seem to still be waiting for the other shoe to drop. AMD was a better story - "David beating Goliath" makes a better headline than "David Gets Squished". However, the last two earnings releases have been different. Generally even if Intel posted strong results, the stock crashed in AH trading - sometimes by more than 5%. That hasn't happened in the last two CC's. Hence INTC has been finally outperforming the market for the first time in a while. That's my measure of success.

Without a fundamental shift in the industry or conquering a vast growth market Intel's upside is limited by the upside of the semiconductor market as a whole. That caps their growth rate at the growth rate of the semiconductor industry minus the drop in ASP as a result of a competitive market. Now if there is a fundamental shift (i.e. AMD becomes the next Via because their products continue to erode in competitive value opening up another 10% to 15% of the market) or Intel is able to capitalize on a new growth area (i.e. Atom and/or it's successors take the handheld market by storm) - then you can make a case for "hyper growth" of Intel stock.