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Intel Corporation Message Board

  • capitalisTOM capitalisTOM Jan 13, 1998 5:14 PM Flag

    Revenue down 14% in Asia and 19% in Japa

    I read certain negative things in Intel's report.

    1. According to the figures by the company, sales was down for 14% in Asia/pacific and 19% in Japan for the 4th qtr. Company's past record shows the growth in Asia and Japan has an average of 45% in the last 12 quarters. Given the fact that the conditions in the Asia/Japan region is getting worse in the first quarter of 98, sales will be down more for the region.
    2. Company warned that revenue in the 1st quarter of 98 will be FLAT with that of 4 qtr 97. The gross margin worsened from 63% in third quarter of 97 to 59% in the 4th qtr of 97 and 55% in the first qtr of 98. With a 55% gross margin(59% in this qtr) and higher capital spending and depreciation costs, Intel's earning in the 1st qtr of 98 will be below 98 cents. Probably in the range of 85 cents to 90 cents which the street is not going to like.
    3. Revenue was actually very weak in the company's usual strongest quarter. The fourth qtr of 95's revenue was $4.58 billion
    while the fourth quarter of 96's revenue was $6.44 billion, an increase of 40%. While the fourth quarter of 97's revenue increased
    a meager 1% over that of 96. this shows the demand is slowing down astonishingly fast. Intel basically is cutting costs and
    doing other accounting work to make this last quarter of 97 look nice for shareholders and make them happy. but that can not hide
    the fact that the comapany as well as the whole tech industry's fundamentals are very weak now. Weakest maybe since the 91
    recession. For a high tech company, basically you can not rely on cutting costs to reach the goal of 50% earning growth. In order for
    the bottom line to shine, the top line must perform, otherwise it is not going to be beautiful for anybody. Actually, Intel's
    revenue growth peaked at the last quarter of 1996 when it registered a 40% growth over the comparable last quarter of 95. The
    company was careful in its earning release not to mention the term 'Asia' or 'Japan', but when it talks about the geographic markets
    slow-down, people know what they are talking about. Moreover, the revenue growth in Americas and Europe is also lacklaster at best. The
    revenue only grew 8% each for these two regions with comparative economic prosperity. Also slowest in years. So looks like the
    trouble is not over.

    True, Intel beat estimate by 98 cents vs 92 cents, but I think there is still a lot of negative things in the report which needed to be read carefully.

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    • Hi, capitalism:

      I read your message and thank you for pointing out the things hidden between the lines. Since the Quarter report is the last of 1997, People at Intel may have to do some window-dressing to make 1997 look good.

      A few cents under or over can be easily manipulated by accounting measures. Intel is known for its high growth. Being "flat" is going downward.

      Intel will not only be affected by Asian markets, it will also be affected by slowing down in the domestic market. US's
      national ownership of PCs is reaching a point of saturation. The market can be boosted only by offering LOWER-end PCs to attract more
      newcomers. Those first-time PC buyers don't need Pentium II or MMX or whatever advanced chips that Intel are developing. They only need
      a PC, with any kind of chip that can carry the "standard" functions of a PC today: general office, internet, multi-media
      applications, games, etc.

      The technology of video-conferencing, internet-phone, or other fancy features over the Internet is not developed into matured products so that people have to upgrade to better processors. Intel has to wait for a few years to fully take advantage of this new trend of revolutionizing the ways that people communicate with eath other.

      INTC�s price is based on the expectation of $1.05 per share, 15% over estimate. I think the Street will be disappointed by this report and INTC will be down tomorrow. In two to four weeks, INTC will be under 60, depending on how things will be going in Asia.

      • 3 Replies to Worry_Buffer
      • Do people buy only basic cars?How many stripped Honda,Toyota,Hundi,Ford and ect.cars do you count when you drive down the freeway?People do not have to have Sport utility or nice sedans but they buy them because they want more than the minimum.I think you should rethink your thesis before you invest.

      • People have been saying this, "US's national ownership of PCs is reaching a point of saturation" for a long time(few years
        at least). Go play Quake 2 if you want to see a reason for getting at 200MHz machine. Also, there are a lot of small businesses
        in this country that are still completely unautomated, and need to buy PCs. The Web will drive geographically distributed
        workers and remote business locations to communicate via Web based applications for commerce, customer service and knowledge
        management. Thus, I think we've only seen the beginning.....

        True growth may be at the low end, but INTC has always been a great manufacturer, and they will continue to operate with efficiency and high margins.

      • How bad a shape can they be in with their latest quarter numbers just announced? After hours trading showed INTC up over $2.00 per share. I wish all my other holdings were in this bad a shape! Time will tell though.

    • Hi, capitalism:

      I read your message and thank you for pointing out the things hidden between the lines. Since the Quarter report is the last of 1997, People at Intel may have to do some window-dressing to make 1997 look good.

      A few cents under or over can be easily manipulated by accounting measures. Intel is known for its high growth. Being "flat" is going downward.

      Intel will not only be affected by Asian markets, it will also be affected by slowing down in the domestic market. US's
      national ownership of PCs is reaching a point of saturation. The market can be boosted only by offering LOWER-end PCs to attract more
      newcomers. Those first-time PC buyers don't need Pentium II or MMX or whatever advanced chips that Intel are developing. They only need
      a PC, with any kind of chip that can carry the "standard" functions of a PC today: general office, internet, multi-media
      applications, games, etc.

      The technology of video-conferencing, internet-phone, or other fancy features over the Internet is not developed into matured products so that people have to upgrade to better processors. Intel has to wait for a few years to fully take advantage of this new trend of revolutionizing the ways that people communicate with eath other.

      INTC�s price is based on the expectation of $1.05 per share, 15% over estimate. I think the Street will be disappointed by this report and INTC will be down tomorrow. In two to four weeks, INTC will be under 60, depending on how things will be going in Asia.


 
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