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Intel plans enhanced chips by next year

By Simon London in San Francisco
Last Update:5:30 PM ET Sept. 7, 2004


Intel plans next year to introduce a new microprocessor architecture across its product range in a bid to encourage customers to replace existing computers.


Paul Otellini, president and chief operating officer, said Intel would introduce 'dual core' chips in each of its main markets personal computers, laptops and servers by the end of 2005.

"This is a major inflection point. We are moving from asking 'how many chips per computer?' to 'how many computers on a chip?'," he said during a keynote address to the Intel Developers Forum in San Francisco.

Intel's new technology strategy follows a period of uncertainty at the world's largest semiconductor company, which has been plagued by a series of missed targets and manufacturing errors.

Several products that were due to be launched in 2004 including a new line of chips for digital televisions and a high-performance version of the Pentium 4 processor for PCs have been delayed until 2005 or later.

Last week, Intel surprised Wall Street by substantially lowering its revenue and profit margin targets for the three months to September.

"We had some fumbles," conceded Mr Otellini.

He said that Intel had standardised the product development process across its divisions in order to prevent similar problems in future.

Dual core microprocessors contain two computing 'engines' on a single chip, enabling computers to complete tasks more quickly without requiring substantially more power.

Intel and other semiconductor companies are opting for this architecture because other methods of increasing computer performance such as increasing the number of instructions per second that a processor can handle have reached a point of diminishing returns.

IBM already sells a dual core version of its Power 5 microprocessor, which is used in corporate servers. Advanced Micro Devices last week demonstrated a dual core version of its Opteron processor with it plans to launch in 2005.

Sun Microsystems last year announced it was reducing investment in its Sparc series of processors to focus on a radical new architecture with up to 16 cores on a single chip.

Mr Otellini also used his keynote speech to highlight Intel's commitment to Wi-Max, a technology that promises to deliver broadband internet access with a range of up to 10 miles.

The company plans to introduce laptops with built-in Wi-Max capability during 2006, he said.



Intel sets dual-core roll-out for 2005
Chipmaker sees new construction in all segments

By Chris Kraeuter, CBS.MarketWatch.com
Last Update: 3:45 PM ET Sept. 7, 2004

SAN FRANCISCO (CBS.MW) -- Without offering specific timing or product information, Intel plans on introducing dual-core processors across its three major computing segments -- servers, desktop computers and notebook computers -- in 2005.

President Paul Otellini announced the roll-out plans during his keynote address Tuesday at Intel's Developer Forum, a semi-annual conference in San Francisco for software and hardware engineers.

A dual-core chip is a single computer chip with two logic processors. The two processors work together to handle multiple tasks simultaneously, to reduce power consumption, and better enable other performance features.

Otellini was not specific regarding which of Intel's (INTC: news, chart, profile) products would be the first to transition to a dual-core construction, but its server chips are expected to get the first dual-core treatment.

During Otellini's speech, Intel conducted a dual-core demonstration with a next generation Itanium 2 chip, currently known as Montecito, with 1.7 billion transistors. Itanium 2 chips are used in the most expensive servers to handle complex computing tasks such as database management.

Otellini also declined to specify other aspects of its dual-core plans, like the architecture base to be used. "We will wait and be confident in what we can ship."

The conservative projections follow several execution problems this year with the company's technology. Otellini said the company is "back to basics" and working off of 90 percent confidence schedules to ensure it can meet shipment targets.

Otellini expects Intel to exit 2006 with 40 percent of its desktop chips made with dual-cores, 85 percent of its server chips containing dual- or multi-cores, and 70 percent of its notebook chips containing dual-cores.

Rival AMD (AMD: news, chart, profile) also has a dual-core offering in the works which it demonstrated for the first time last week. AMD said its dual-core products should come out in mid-2005.

Otellini said it's not important which company is first with its dual-core offering. "This is not a race; it is a sea change in computing."

Otellini also aid Intel is focused on 3 billion potential customers in emerging markets, one third of which are in the Asian Pacific region

He said through partnerships, Intel's investment organization, education and training, Intel is "seeding the market" for technology adoption in these untapped areas. "We are ensuring every impediment to this growth is taken away."

Wall St looks for fresh signs of Intel swagger

By Simon London in San Francisco
Last Update:3:26 PM ET Sept. 6, 2004


Paul Otellini has some explaining to do this morning when he takes the stage at the twice-yearly Intel Developers Forum.


The 5,000 customers and business partners gathered in San Francisco will be looking for evidence that Intel has regained its technological swagger after a series of product delays and unexpected changes to its "road map" for future development. Wall Street will also be watching. The world's largest semiconductor company last week shocked investors by lowering its revenue and profit margin targets for the current quarter. Intel's stock shed 7 per cent, wiping $10bn from the company's market value.

It is against this background that Mr Otellini president, chief operating officer and heir apparent to chief executive Craig Barrett needs to offer reassurance all round. The warning was puzzling at a time when sales of PCs seem strong. Designing and building chips to power PCs is Intel's core business. Its market share is about 80 per cent.

"End demand [for PCs] is still pretty robust," says Joe D'Elia, PC market analyst at research group iSuppli. "If you look at the electronics industry I think 2004 will be a damned good year."

Industry analysts believe the PC market grew at a month-on-month rate of about 10 per cent during August, suggesting that this year's "back to school" selling season will be a good one. For the three months to September, the consensus expectation is for worldwide PC market growth of 13-15 per cent.

So how come the dominant supplier of PC chips is suffering? "We believe Intel's execution is to blame," said Tai Nguyen, semiconductor industry analyst at Susquehanna Financial Group, in a research note. Execution in this context means the product delays, manufacturing recalls and other errors that have plagued Intel this year. For example, the delayed launch of a new chipset for PCs, codenamed Grantsdale, led to lost sales of a potentially high-margin product.

Meanwhile, Intel built excessive inventory of both Grantsdale and high-end "Prescott" chips. Clearing this backlog will require both price cuts and reduced output from its multi-billion dollar chipmaking facilities. Profit margins will be hit on both counts.

To make matters worse, Intel is also facing tough competition for the first time in years from Advanced Micro Devices, the Texas-based chipmaker that is its only serious rival in the market for PC chips.

AMD has always lived in the shadow of its much larger competitor. This year, however, it has hit its stride. Its Opteron processor, used in corporate servers, is taking sales from Intel's Xeon and Itanium lines. The success of Opteron even led Intel to mimic some of AMD's design features an almost unprecedented step.

Last week, AMD again stole a march by demonstrating a "dual core" version of Opteron that contains two processing "engines" on a single chip. While Intel will bring its own dual core chip to market in 2005, the impression that AMD is setting the pace is bad news for the market leader.

For the technologists in the audience at this week's developers forum, details of Intel's own dual core engineering strategy will be among the highlights of the meeting. When, exactly, does Intel plan to launch dual core versions of its Pentium, Xeon and Itanium chips?

Investors will be looking for this and something more: evidence that one of the tech industry's giants still has the management talent to match its stature. Enter Mr Otellini, stage right.

acho que os $20 não vão servir de base para um rebound, o sox ainda tem espaço para cair.

Newsletters sticking with Intel

By Mark Hulbert, CBS.MarketWatch.com

Mark Hulbert is the founder of Hulbert Financial Digest in Annandale, Va. He has been tracking the advice of more than 160 financial newsletters since 1980

Last Update: 11:29 PM ET Sept. 5, 2004


ANNANDALE, Va. (CBS.MW) - Intel dropped a bombshell Thursday afternoon after the market closed when it announced that its results for the current quarter would come in much lower than previously forecast.

Its stock dropped more than 7 percent in trading Friday

Since Intel (INTC: news, chart, profile) is one of the more widely recommended companies in the investment newsletter world, I have been closely monitoring weekend updates to see what the newsletter editors thought of the company's announcement and the market's reaction to it. Are they any less enamored of Intel? Or does the drop in its stock render it even more attractive?

As usually is the case when trying to generalize in the newsletter industry, the answer is a "little of both." But as of Sunday night, no sell signals had been issued from any of the 11 newsletters that were recommending the stock prior to the company's announcement on Thursday.

In fact, the editors of just two of those 11 newsletters even bothered to mention the stock. The other nine appear to be treating Intel's lowered forecast as not even deserving of a mention.

One of the editors who did mention Intel's announcement was Stephen Leeb, who edits a newsletter called The Complete Investor. In an email to subscribers Friday night, he wrote: "While we are not pleased with the reduced company guidance, Intel is by far the world's dominant semiconductor company and trades at a very attractive valuation. For this reason, we advise holding on to Intel."

The second one to mention the company - Michael Murphy, editor of Technology Investing - went even further than Leeb, concluding that "Intel is still a strong buy, especially after Friday's drop."

In support of his buy rating, Murphy reminded subscribers that even Intel's lowered forecast represents healthy growth over the last year. Murphy furthermore reminded subscribers that, in its Thursday night call, Intel said that if it "has just a normal September, they will hit their new numbers. If there's a rebound in consumer spending, they will beat them."

Murphy also cautions subscribers from extrapolating Intel's weakness to the semiconductor industry as a whole. Until more companies provide "mid-quarter guidance," we will have no way of knowing whether "there's a trend or not." Until then, Murphy reminds us that "most of the so-called excess inventories in the industry are at Intel and Hewlett-Packard (HPQ: news, chart, profile) - it is not a widespread problem so far."

What about the other 160 or so newsletters I monitor that, prior to last Thursday, were not recommending Intel? While so far none of them has issued a buy signal on the stock, none has sold the stock short, either.

Perhaps the newsletter industry has taken to heart what Richard Russell, editor of Dow Theory Letters, wrote on Friday about stock trading in general: "The market's reaction to spot news is usually about 75 percent emotion. And very often wrong."

Techs go down with the chip

Intel's weak 3Q guidance and warnings from other semis make for an ugly outlook for the Nasdaq.

September 3, 2004: 12:30 PM EDT
By Paul R. La Monica, CNN/Money senior writer


NEW YORK (CNN/Money) - Thanks for nothing, Intel.


An in-line job report wasn't enough to save tech stocks from a nasty pummeling Friday morning. The Nasdaq sunk more than 1.5 percent following the sub-par mid-quarter update from semiconductor kingpin Intel after the closing bell Thursday.

Chip stocks got the worst of it. All 18 stocks in the Philadelphia Semiconductor index were in the red. The SOX was down nearly 5 percent Friday and hit a new low point for the year.

Semiconductor stocks were further hurt by reduced sales outlooks from chipmakers Altera and Integrated Device Technology on Thursday as well a lower revenue forecast from Cypress Semiconductor Friday. That makes it harder to pass off Intel's woes as being company specific.

The fact that Intel pointed to softening consumer demand for PCs and communications devices (i.e. cell phones) is particularly not a good sign.

"Between PCs and handsets you've got about 35 percent of total semiconductor consumption. This is going to impact everybody in the chip sector. Nobody is outside the scope of slowing growth in those two markets," said Kevin Rottinghaus, an analyst with FTN Midwest Research.


Tepid outlook for the rest of 2004...


It has become clear that Intel's inventory build-up during the first and second quarters of this year was a gamble that failed. Intel will now be faced with a glut of chips that it will likely have to lower prices on in order to sell. It's either that, or Intel will be forced to take a charge to write-down the cost of these additional components.

Neither option is an appealing one for investors.
~
"Obviously there's a slowdown for tech," said Robert Burleson, an analyst with J.B. Hanauer. "There will be a lot of choppiness because of the inventory correction."

Another cause for concern was Intel's characterization of the recent slowdown in demand as being "global."

Ambrish Srivastava, an analyst with Harris Nesbitt, said that China has become a more important market for Intel and other tech companies during the past few years. But the Chinese government has taken some steps to cool down its hot economy and that could be hurting Intel and other techs.

"China is becoming a bigger part of the puzzle so tech is not immune to a slowdown there," Srivastava said.

There is still some faint hope that Texas Instruments, a leading supplier of chips used in cell phones, digital televisions, personal computers and many industrial products, could wind up calming investors -- its mid-quarter update is scheduled for next Wednesday. TI, although smaller than Intel, has a broader customer base.

"Texas Instruments is a better bellwether for tech demand since it is in so many different markets,"said Burleson.


...and 2005 could be even weaker


Looking ahead to 2005, Srivastava fears that there more is reason for worry. He thinks chip companies' profit margins could dip further as emerging markets become larger contributors to sales.

"Countries like China and India will show some good long-term demand but there's no need for consumers to buy the latest products on the market. That will add to downward pressure on average selling prices of chips," he said.

And even though many chip stocks have fallen so far this year that many now appear to sport reasonable valuations is not enough to get Wall Street excited. Intel, for example, trades at less than 15 times 2005 consensus earnings estimates.

Analysts said it's difficult to make the argument that chip stocks are bargains because earnings estimates are likely to keep declining.

In fact, Burleson said his favorite semiconductor stocks actually trade at premium valuations. He likes analog chip firms Linear Technology and Maxim Integrated Products, which are both valued at more than 20 times next year's earnings estimates, because he thinks they are unlikely to lower their sales outlooks for the current quarter since they aren't as exposed to the PC and cell phone markets.

When push comes to shove,the semiconductor business is highly cyclical. So investors don't tend to care as much about stocks appearing to be overvalued when things are going well. Likewise, the market doesn't tend to treat the stocks as compelling value plays during an industry trough.

And with evidence growing by the day that points to a peak for this latest cycle, it's tough to see how stock prices will head higher in the immediate future.

"Fundamentals still look like they're going to get worse before they get better and that's what keeps us on the sideline," said Rottinghaus.


Analysts quoted in this story do not own shares of the companies mentioned and their firms have no investment banking ties to the companies.