Dueling Fools
Intel In Sides
September 1, 1999
The Bear Rebuttal
By
"The future," my worthy Fool writes, "is what Intel is all about." I agree. That's why I'm bearish. Competition, obsolescence, vanilla shakes. Pick a worry, any worry -- if you take your eyes off the rearview mirror for a second you might notice the deer frozen stiff by your headlights.
Brian is good. Brian is really good. He realizes that Intel is overvalued by any available gauge so he wants you to see Intel as a major Internet player where valuations run wider. He's banking on tomorrow's tomorrow. That's a dangerous game when the future is anything but certain. It's almost as if I were trying to push a gas-guzzling lemon on you. You ask me about fuel efficiency, I skirt the issue.
"Miles per gallon," I laugh. "In the future we will all be flying around in tiny little pods and beaming our own molecules from place to place."
Sure, it might all be possible, but what does that have to do with buying the clunker today? Do you really think Intel will be such a great force in the $1 trillion in projected e-commerce merchandise sales four years from now? Don't you realize that the businesses that chunk will replace is already Intelisized. Corporate America offline is not run on loose leaf and ledgers, my friends. If Brian is saying that Intel will lose some business here and make up for it over there, then OK, maybe I'll buy that. However, that isn't hypergrowth. Brian waves that trillion-dollar figure as if some of you might think that he is referring to Intel itself generating that sum. Intel is already the debatable backbone behind trillions upon trillions and still rings up just a tenth of its market cap in annual sales.
So if you happen to have $280 billion burning a hole in your pocket, why buy Intel? For that amount you can pick up America Online <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: AOL)") else Response.Write("(NYSE: AOL)") end if %>, Yahoo! <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: YHOO)") else Response.Write("(Nasdaq: YHOO)") end if %>, and Amazon.com <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: AMZN)") else Response.Write("(Nasdaq: AMZN)") end if %> with $120 billion left to spend on Andy Grove's next birthday bash.
Intel is not some undiscovered Internet stock. If that were so, then maybe I could argue that General Electric <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: GE)") else Response.Write("(NYSE: GE)") end if %> is a great online play because, gosh, folks at the online fulfillment warehouses can't work in the dark. Unfortunately, neither does Brian's argument. We don't know how our access will be powered four years from now. What if the Alpha proves to be the better chip than Intel's 64-bit solution the same way Athlon is whipping the Pentium III?
Brian wants you to think that 2.01 minus 2.00 is 0.00 -- the way 3 million of the earliest Pentium chips butchered simple floating point arithmetic five years ago. Celeron's ride hasn't been smooth either. Back in April, it was reported that Intel's chips were buggy with the upcoming Windows 2000. It's quite the track record. To save corny journalism any chance at headline originality next year, let me be the first to coin the header, "Merced's Bends!"
Since Intel is my fellow Fool's only stock holding, I have a word of advice: diversify! Equity monogamy can be a real heartbreaker. Shop around. Realize that you shouldn't count on "rising margins" a week after the company just slashed prices by 41% on its highest-margin products. "Bubble-gum awe" is fine, Brain -- just avoid getting any of it on you when that bubble bursts.
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