FOOL PLATE SPECIAL
An Investment Opinion
by Randy Befumo
Intel Downside
Shares of INTEL CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: INTC)") else Response.Write("(Nasdaq: INTC)") end if %> plunged $4 3/4 to $87 1/8 today after the company released third quarter earnings last night. The semiconductor behemoth earned $0.88 EPS in the quarter, up 20% over year-ago levels, but two to three cents below consensus estimates. Even more disconcerting was the fact that Intel provided pretty cautious "guidance" about what investors should expect next quarter. All of this comes as a surprise to many investors, who are at a loss to explain why Intel appears to be having so much trouble in the face of solid demand for personal computers.
Weighing on Intel's profits this quarter was a 3.0% drop in the company's gross margin versus last quarter, putting gross profits at 57.7% of revenues. The transition to the Pentium II, lower unit sales of flash memory products and lower prices across the board are what caused this drop in the gross margin -- one Intel has been warning Wall Street to expect for the last few quarters. Even with its main competitor AMD <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: AMD)") else Response.Write("(NYSE: AMD)") end if %> apparently unable to produce its next-generation K6 chips in enough demand to satisfy customers, Intel continues to push ahead on its relentless price-cutting schedule. Although these price cuts are great for the "box" manufacturers who are churning out PCs to sate record demand, they do increase the volatility of Intel's results and make it more difficult to forecast future profits.
Intel's management also spent quite a bit of time in last evening's conference call decreasing expectations for next quarter. Based on their assessment of current backlog and indications from customers, Intel expects sales in the fourth quarter to only be slightly above those in the third quarter. This would put sales at around $6.2 billion to $6.5 billion, flat with last year's fat $6.4 billion in revenues. This is a result of the price cuts as well as softening demand from "box" makers, who are trying to tighten up their inventories. With everyone from IBM to Hewlett Packard to Compaq trying to imitate the Dell model, it makes sense that all of these global giants would try to increase their inventory turns, meaning that they will start to burn less component inventory over the next few months. In the long-term, Intel seems to remain secure in its market domination versus AMD and National Semiconductor/Cyrix. In the short-term, however, it appears that money managers looking for something that will explode in the next few weeks are going elsewhere.
Auto paint and accessories distributor THOMPSON PBE <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: THOM)") else Response.Write("(Nasdaq: THOM)") end if %> gained $1 11/32 to $7 23/32 after agreeing to be acquired for $8.00 per share in cash by FINISHMASTER INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: FMST)") else Response.Write("(Nasdaq: FMST)") end if %>, a similar company.
RED BRICK SYSTEMS INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: REDB)") else Response.Write("(Nasdaq: REDB)") end if %> rose $1 17/32 to $9 3/4 after the data warehousing software company reported Q3 revenues of $11.7 million, up 30% from last year. EPS came in at $0.03 (before acquisition-related charges), beating the consensus analyst estimate of a per-share loss of $0.11.
High-end print server software company SPLASH TECHNOLOGY HOLDINGS INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SPLH)") else Response.Write("(Nasdaq: SPLH)") end if %> rose $5 1/4 to $44 7/8 on reporting Q4 revenues of $25 million and EPS of $0.40, beating estimates by 21%.
RAMBUS INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: RMBS)") else Response.Write("(Nasdaq: RMBS)") end if %>, a designer, licenser, and marketer of high-speed processor-to-memory interfaces and other chip-to-chip interfaces, gained $4 1/2 to $57 on reporting Q4 revenues of $7.8 million and EPS of $0.04, doubling the mean estimate of $0.02.
"Component and supplier management" software company ASPECT DEVELOPMENT <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ASDV)") else Response.Write("(Nasdaq: ASDV)") end if %> jumped $3 1/2 to $45 after reporting yesterday a 79% increase in Q3 revenues of $11.5 million and a 71% rise in EPS of $0.12, topping estimates of $0.10.
PINNACLE FINANCIAL SERVICES <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: PNFI)") else Response.Write("(Nasdaq: PNFI)") end if %> picked up $2 3/8 to $42 1/2 after the Midwest bank holding company agreed to be acquired by CNB BANCSHARES INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: BNK)") else Response.Write("(NYSE: BNK)") end if %> in a deal valuing Pinnacle shares at $46.32 apiece (as of last night's close). CNB lost $2 1/16 to $42 11/16 on the announcement.
Machine vision systems manufacturer COGNEX CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CGNX)") else Response.Write("(Nasdaq: CGNX)") end if %> gained $2 1/4 to $34 3/8 on reporting third quarter revenues of $44 million and EPS (before charges) of $0.29, beating estimates of $0.24.
Dermatological products company MEDICIS PHARMACEUTICAL <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: MDRX)") else Response.Write("(Nasdaq: MDRX)") end if %> lost $3 1/4 to $49 on reporting a 90% increase in Q1 revenues and EPS of $0.25, beating the mean estimate of $0.23 .
COHERENT INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: COHR)") else Response.Write("(Nasdaq: COHR)") end if %> was slashed $11 7/8 to $45 after the laser manufacturer pre-announced Q4 EPS of $0.54 to $0.58, which will miss the mean First Call estimate of $0.80. The company said revenues were hurt by foreign exchange translation because of the strong dollar, price pressures, product transitions, increased R&D, and because the sale of some lasers are more seasonal than previously believed.
Bathware and plastics products manufacturer HOME PRODUCTS INT'L INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: HPII)") else Response.Write("(Nasdaq: HPII)") end if %> fell $1 1/4 to $12 after forecasting Q3 EPS of $0.22 to $0.23, below estimates of $0.28.
SYNOPSYS INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SNPS)") else Response.Write("(Nasdaq: SNPS)") end if %> fell $3 13/16 to $39 1/8 after the electronics design automation software company announced an agreement to merge with VIEWLOGIC SYSTEMS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: VIEW)") else Response.Write("(Nasdaq: VIEW)") end if %>, which gained $2 1/4 to $24 3/4 on the news. Synopsis will issue 0.6521 of its shares for each Viewlogic share.
Silicon wafer manufacturer MEMC ELECTRONIC MATERIALS INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: WFR)") else Response.Write("(NYSE: WFR)") end if %> dropped $3 11/16 to $21 5/16 after pre-announcing a Q3 per-share loss of $0.10, double the First Call per-share loss estimate. The company also foresees a similar loss for the upcoming fourth quarter.
Utilities meter reading equipment company ITRON INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ITRI)") else Response.Write("(Nasdaq: ITRI)") end if %> fell $1 5/8 to $25 on reporting a 51% increase in Q3 revenues and EPS of $0.11, just below the mean estimate of $0.12.
BARNES & NOBLE <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: BKS)") else Response.Write("(NYSE: BKS)") end if %> lost $3 3/4 to $28 after Furman Selz lowered its rating on the seller of books to "neutral" from "buy."
Engine manufacturer CUMMINS ENGINE INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CUM)") else Response.Write("(NYSE: CUM)") end if %> downshifted $7 3/16 to $72 7/16 on reporting Q3 revenues of $1.4 billion and EPS of $1.40, which more than doubled last year's EPS of $0.67 but fell short of the consensus estimate of $1.45.
SBARRO INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: SBA)") else Response.Write("(NYSE: SBA)") end if %>, the Italian restaurant chain, lost $1 13/16 to $27 13/16 after warning that it sees Q3 earnings per share coming in flat compared with last year's results.
A racial discrimination lawsuit brought by the State of Pennsylvania against AVIS RENT A CAR INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: AVI)") else Response.Write("(NYSE: AVI)") end if %> dropped the price of that company's stock today $1 7/16 to $27 1/16.
FORD <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: F)") else Response.Write("(NYSE: F)") end if %>
(703) 736-7225 -- replay on 10/15 and 10/16 @ 2:00 pm EDT
CARLISLE COMPANIES <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: F)") else Response.Write("(NYSE: F)") end if %>
(800) 633-8284 -- replay from 10/15 @ 5:00 pm EDT through 10/16 @ 5:00 pm EDT
SUMMIT PROPERTIES <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: SMT)") else Response.Write("(NYSE: SMT)") end if %>
(800) 633-8284 (code: 3148971) -- replay through 5:00 pm EDT on 10/17
FREDDIE MAC <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: FRE)") else Response.Write("(NYSE: FRE)") end if %>
(800) 475-6701 (code: 358103) -- replay from 10/16 @ 8:00 am EDT through 10/17
INTEL CORPORATION <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: INTC)") else Response.Write("(Nasdaq: INTC)") end if %>
(402) 220-0103 -- replay through 10/17
ECHLIN, INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ECH)") else Response.Write("(NYSE: ECH)") end if %>
(800) 683-1535 (code: refocus) -- replay through 10/17
ASCEND COMMUNICATIONS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ASND)") else Response.Write("(Nasdaq: ASND)") end if %>
(800) 475-6701 (code: 358559) -- replay through 10/17
CCA PRISON REALTY TRUST <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: PZN)") else Response.Write("(NYSE: PZN)") end if %>
(402) 220-8775 -- replay through 10/17
HARLEY-DAVIDSON <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: HDI)") else Response.Write("(NYSE: HDI)") end if %>
(402) 220-0107 -- replay
360 COMMUNICATIONS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: XO)") else Response.Write("(NYSE: XO)") end if %>
(402) 220-3014 -- replay until 10/22
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Randy Befumo (TMF Templr), Fool One
Dale Wettlaufer (TMF Ralegh), Fool Two
Alex Schay (TMF Nexus6), Fool Three
Contributing WritersSelena Maranijan (TMF Selena), Fool Four
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