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FOOL PLATE SPECIAL
An Investment Opinion
by Dale Wettlaufer
Intel Basks in Q4 Sunshine
<% ' AvantGo:FoolPlate %>Semiconductor dreadnought Intel Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: INTC)") else Response.Write("(Nasdaq: INTC)") end if %> barreled ahead into uncharted new-high territory after announcing last night that fourth quarter results will be better than expected. Due to strong demand for "PC products across all market segments and in all geographies," quarterly revenues are projected to rise 8% to 10% sequentially from last quarter's $6.7 billion. In addition, gross margin is expected to exceed the high end of the company's 1998 goal of 50%, plus or minus a few points. Historically, the company has said its goal is to increase absolute gross margin dollars, not percentages. But this quarter, gross margin should reach 55%, indicating that the company has a good handle on production and that its product mix is where Intel wants it.
On revenues of $7.24 billion to $7.37 billion, the company will bring $2.47 billion to $2.51 billion to the operating income line after a sequential increase of 8% to 10% in operating expenses, which will depend upon actual revenue performance. Including a 5% sequential increase in R&D spending, to $650 million (which, by the way, is 123% greater than AMD's Q2 revenues), and a 33% tax rate, earnings per share should reach $1.02 to $1.04. That also assumes no sequential change in the diluted sharecount. Current EPS estimates for the quarter range from $0.83 to $1.01, according to Zacks.
Coming into the quarter, Intel's position on inventories was that they were in-line and that product orders were being placed sooner and "tighter" than in the past, meaning sales to OEMs are matching end-market demand much better than in the past. All of this matches what Compaq <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CPQ)") else Response.Write("(NYSE: CPQ)") end if %> has been talking about all along with its initiatives to streamline production and cut down the terms of price protection for distributors. In addition, the recent action in disk drive companies and firmer DRAM pricing haven't made this the toughest puzzle in the world to figure out.
Of all the PC makers today, Compaq is benefiting the most from the news, gaining $1 5/16 to $34 3/16, while Dell Computer <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: DELL)") else Response.Write("(Nasdaq: DELL)") end if %> is up $2 3/16 to $72 1/2. Gateway <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: GTW)") else Response.Write("(NYSE: GTW)") end if %> was flat at noon and Micron Electronics <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: MUEI)") else Response.Write("(Nasdaq: MUEI)") end if %> was down a bit, though its shares have outperformed every major player over the last two-plus months. Intel is living up to the expectations of those who saw the bright spots in the second and third quarter reports and those who have expected a good fourth quarter. Pretty soon, the discussion is going to shift to first quarter results, but in the meantime, Intel is basking in the sunshine of a quarter of good end-user demand and very strong execution.<% ' AvantGo:End %>
<% ' AvantGo:Ups %>Fox Entertainment <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: FOX)") else Response.Write("(NYSE: FOX)") end if %>, the spin-off of News Corp.'s <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: NWS)") else Response.Write("(NYSE: NWS)") end if %> U.S. movie and TV operations and sports teams, traded up $2 1/8 to $24 5/8 from an initial offering price of $22.50 a share after raising $2.81 billion from the sale of 124.8 million shares, making it the third-largest IPO ever after the offerings for Conoco <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: COC)") else Response.Write("(NYSE: COC)") end if %> and Lucent Technologies (NYSE LU).
MONY Group <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MNY)") else Response.Write("(NYSE: MNY)") end if %>, formerly known as Mutual Life Insurance Co. of New York, gained $4 13/16 to $28 5/16 from an IPO price of $23.50 a share. The group is remaking itself as a stock life insurance company from a mutual life insurance company.
The latest Internet IPO, EarthWeb Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: EWBX)") else Response.Write("(Nasdaq: EWBX)") end if %>, soared ahead $34 7/8 to $48 7/8 from an IPO price of $14 a share. The information technology information and services provider sold 2.1 million shares in the IPO. The enthusiasm for the Internet company carried over to some other online companies. Excite <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: XCIT)") else Response.Write("(Nasdaq: XCIT)") end if %> jumped $2 1/4 to $53 7/8, Egghead.com <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: EGGS)") else Response.Write("(Nasdaq: EGGS)") end if %> picked up $3/4 to $14 5/8, Cybershop <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CYSP)") else Response.Write("(Nasdaq: CYSP)") end if %> bumped up $2 9/16 to $11 5/8, GeoCities <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: GCTY)") else Response.Write("(Nasdaq: GCTY)") end if %> moved up $1 1/4 to $43 5/8, and Think New Ideas <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: THNK)") else Response.Write("(Nasdaq: THNK)") end if %> added $1 to $12 7/8.
Entertainment and consumer products retailer and direct marketer K-tel International <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: KTEL)") else Response.Write("(Nasdaq: KTEL)") end if %> surged another $11 15/16 to $34 7/8 following yesterday's news that its K-Tel Express home shopping service will be included on the Microsoft Network's shopping channel. Rival online music vendor N2K Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: NTKI)") else Response.Write("(Nasdaq: NTKI)") end if %> rocketed up $3 1/4, or 34.9%, to $12 9/16, and N2K merger partner CDnow <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CDNW)") else Response.Write("(Nasdaq: CDNW)") end if %> soared $3 1/2, or 29.2%, to $15 1/2.
Telecommunications equipment maker Lucent Technologies <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: LU)") else Response.Write("(NYSE: LU)") end if %> rang up a $1 3/8 gain to $90 3/8 after winning a three-year contract worth up to $250 million from Time Warner Telecom for telecommunications products and services. The Time Warner <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: TWX)") else Response.Write("(NYSE: TWX)") end if %> subsidiary and facilities-based competitive local exchange carrier (CLEC) will buy Lucent optical networking, communications software, switching and access products. Lucent also was awarded a multimillion-dollar contract to supply data networking products and services to China's State Postal Bureau.
Casual apparel retailer Abercrombie & Fitch <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ANF)") else Response.Write("(NYSE: ANF)") end if %> was shopped up $1 7/16 to $49 15/16 on the heels of reporting Q3 EPS of $0.47, a 135% increase from $0.20 in the same year-earlier period and ahead of analysts' expectations of $0.35. Total sales jumped 55% to $229.7 million, while comparable-store sales were up 35%. BancBoston Robertson Stephens reiterated its "strong buy" rating on the company's shares and raised its EPS estimates to $1.74 from $1.63 for fiscal 1998 and to $2.20 from $2.05 for fiscal 1999.
Natural gas provider North Carolina Natural Gas Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: NCG)") else Response.Write("(NYSE: NCG)") end if %> advanced $8 11/16 to $32 5/16 after agreeing to be acquired by power plant operator Carolina Power & Light <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CPL)") else Response.Write("(NYSE: CPL)") end if %> in a stock swap valued at about $354 million. The deal, which will be a pooling of interests, is expected to be accretive to Carolina Power's earnings.
Wireless communications provider Omnipoint Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: OMPT)") else Response.Write("(Nasdaq: OMPT)") end if %> connected for a $1 1/8 gain to $8 15/16 after yesterday announcing it has settled allegations that it rigged bids in Federal Communications Commission auctions of digital wireless service licenses, without admitting guilt or paying any penalties. The company also reported a Q3 loss of $2.98 per share, which was $0.05 per share worse than the First Call mean estimate, and said it is currently in negotiations with "multiple potential strategic partners."<% ' AvantGo:End %>
<% ' AvantGo:Downs %>Contract nonclinical pharmaceutical testing firm BioReliance Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: BREL)") else Response.Write("(Nasdaq: BREL)") end if %> fell $2 7/16 to $7 3/4 after reporting Q3 EPS of $0.14, even with last year's number but $0.03 below the Street's projections. The company said CFO Mike Thomas is leaving and will be replaced by Patrick Spratt, a former executive at Compaq Computer's <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CPQ)") else Response.Write("(NYSE: CPQ)") end if %> Digital Equipment Corp. Morgan Stanley cut BioReliance to "outperform" from "strong buy" today, while Hambrecht & Quist cut the company to "buy" from "strong buy."
Hotel real estate investment trust (REIT) Patriot American Hospitality <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: PAH)") else Response.Write("(NYSE: PAH)") end if %> shed $9/16 to $7 9/16 following reports that its lead investment banker, PaineWebber Inc., has stepped away from that role. "Management has lost the confidence of investors," PaineWebber analyst Jonathan Litt told The Wall Street Journal. Morgan Stanley Dean Witter replaces PaineWebber.
Frontier Insurance Group <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: FTR)") else Response.Write("(NYSE: FTR)") end if %>, which sells specialty property and casualty insurance, tumbled $2 1/4 to $15 3/8 after it said Q3 operating income was $0.40 per share, $0.02 above last year but $0.03 short of estimates. Among the reasons cited for the shortfall were dropoffs in medical malpractice and commercial earthquake business.
Video duplication and distribution company VDI Media <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: VDIM)") else Response.Write("(Nasdaq: VDIM)") end if %> lost $1 1/4 to $8 1/8 after it reported Q3 EPS of $0.16, beating last year's $0.10 number but missing analysts' consensus figure by $0.02. Gross margins were 40%, better than the year-ago 37% mark.
Disk arrays and SCSI adapters designer Ciprico Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CPCI)") else Response.Write("(Nasdaq: CPCI)") end if %> slipped $11/16 to $7 following its announcement of fiscal Q4 losses of $0.04 per share, well off last year's profits of $0.16 per share and Wall Street's projected profits of $0.03 per share. Sales fell 15% from the same quarter a year ago to $7.4 million.
Healthcare marketing and communications services company Healthworld Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: HWLD)") else Response.Write("(Nasdaq: HWLD)") end if %> dropped $3 1/16 to $12 1/16 after it said Q3 EPS was $0.20, even with market projections. CEO Steven Girgenti said Healthworld expects Q4 EPS to fall below the Q3 figure because of poor contributions from its medical contract sales group. The four analysts surveyed by First Call expected Q4 EPS of $0.24.
Promotional marketing company Cyrk Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CYRK)") else Response.Write("(Nasdaq: CYRK)") end if %> gave away $1 to $9 1/8 following its announcement of Q3 losses of $0.02 per share, compared with earnings of $0.01 per share last year. President Patrick Brady said Cyrk has made "significant strides in terms of operating efficiencies," citing an increase in the firm's gross margins.
Broadband network systems company International FiberCom <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: IFCI)") else Response.Write("(Nasdaq: IFCI)") end if %> stumbled $23/32 to $8 1/4 after it reported Q3 EPS of $0.11 (before acquisition-related costs), up from $0.06 last year and flat with Wall Street's consensus estimate. CEO Joseph Kealy said he was optimistic about future quarters, saying "contract activity remains extremely brisk and we expect to be announcing a significant number of new awards in the very near future."
Supply-chain management software developer i2 Technologies <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ITWO)") else Response.Write("(Nasdaq: ITWO)") end if %> fell $15/16 to $24 7/8 after Prudential Securities downgraded the company to "hold" from "accumulate."
Rechargeable lithium battery researcher Valence Technology <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: VLNC)") else Response.Write("(Nasdaq: VLNC)") end if %> ran down $23/32 to $7 19/32 after it said its fiscal Q2 net loss was $0.15 per share, better than last year's loss of $0.26 per share. Research and development costs increased to $4.7 million from $4.4 million a year ago.<% ' AvantGo:End %>
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Contributing Writers Yi-Hsin Chang (TMF Puck), a Fool Brian Graney (TMF Panic), another Fool David Marino-Nachison (TMF Braden), a new Fool
Editing |