Replies to post #7292 on Intel Corp (INTC)

[Tenchu]

Elmer, time for a little Fleck-bashing. From 7/17/2003:

http://aol.thestreet.com/markets/billfleckenstein/10101019.html

Intel Elation on Raised Expectation: Turning now to Intel, despite my concerns about being short generically, my rationale for this short concerns the second half, not the second quarter. Last night, everyone got excited because Intel made the second-quarter numbers and didn't lower guidance for the third quarter. But what really fanned the flames was the fact that the company boosted its gross-margin guidance from roughly 51% to 54% (plus or minus a couple percentage points). So, 51% goes to 52%-56%.

Some of that was purely a line-item shift, i.e., employee costs coming out of costs of goods sold and into R&D, and a slight reduction in depreciation. I think that the expectations folks have drawn on the back of this will not come to pass. Further, it seems to me that what the company just delivered was more than fully built into the stock, considering all the dead fish piling on in anticipation of the second-quarter results (about which they were correct).

In the meantime, Intel faces a number of other headwinds. PC demand appears to be slowing down, according to data from market-tracking service NPD Intellect. Certainly, Intel's business plan of always selling high-end processors is totally flawed, given that people can get what they want for $500 to $1,000. Samsung is going to make Intel's life difficult in flash. Also, I don't believe the Centrino will do all that spectacularly. Yes, maybe folks already in the market for a notebook will look for this, but it won't suddenly make folks unhappy with what they've got. And anybody's who's dying to get Centrino-like features can always buy a Wi-Fi card for not much money.

The Case for Intel Agita: Furthermore, and perhaps most important, I anticipate good things from Advanced Micro Devices' (AMD-NYSE) Athlon XP part, which is slated to roll out in the third quarter (don't laugh). It will underscore not just the aforementioned problems but also Intel's less-than-brilliant design capabilities, and cause serious pricing (margin) pressure. Its Itanium product is more like a Titanic product. If Intel can't make its money at the high end, and it can get scooped by AMD on design (remember that AMD's 64-bit part is backward-compatible), I think this spells very serious problems for the company.

Not only do I think Intel will miss the numbers implied by the gross-margin guidance, I believe it will do materially worse. (But even if the company were to magically make the 90 cents or so the bulls expect, it's still more expensive than Microsoft (MSFT-Nasdaq) . If you must own a PC supplier, why not go with the monopoly?) That's my prediction for the third and fourth quarters, which is why I have mostly been buying October paper. In any case, for right or for wrong, that's my take on the market in general and Intel in particular, and those are my tactics.

[Jerry R]

Elmer Phud - Intel still on schedule to ship for revenue both desktop and mobile products on 90nm this quarter.

Did you hear this in the CC? The phrase "ship for revenue" could imply that revenue products will be shipped by the end of the quarter, with the official product launches early in Q1.

When you think Dothan and Prescott will officially launch?

Personally, I don't think an early Q1 launch will have any significant effect on Intel in any case. Conversely, I don't think Intel could have guided their Q4 estimates any better than they did even if Prescott/Dothan launched in Q4 this year IMHO.