e-Mail a Column! (Drip Port) May 7, 1999

<THE DRIP PORTFOLIO>
e-Mail a Column!
Plus, Intel and Touchstone Friday

by Jeff Fischer (TMFJeff)

CHICAGO, IL (May 7, 1999) -- I disagree with everything that Brian has ever written.

Fool on!

No, really. Fool on!

OK. Maybe Fool on?

No? All right. You got me. That first sentence isn't true.

I rarely disagree with Brian, and when I do it's always an enjoyable exercise. Such is the case this week. Almost everything in Brian's Thursday column makes sense to me. It is very accurate analysis. However, it doesn't change my opinion.

On Wednesday, I took offense at journalists' use of the words "cutthroat" to describe Intel's (Nasdaq: INTC) industry. That rampantly used description adds to something that has been snowballing for almost two years. That something is a sentiment: sentiment that Intel's industry is becoming unattractive. A belief that it is going to the dogs.

I find that undertone very misleading.

The industry isn't going to the dogs at all. Certain segments of the industry, namely the low-end chip market, are very competitive and the pricing there is cutthroat, as I agreed on Wednesday. However, that doesn't mean that the entire industry is cutthroat. Cutthroat implies unattractive. Intel should achieve $30 billion in sales and profit margins of above 25% this year. Most of its profit is still derived from Pentiums. That Intel is earning more and more on high-end products is the result of smart management. That competitors can't compete in the high-end to save their skins is too bad. That doesn't mean that the whole industry is cutthroat rotten.

If a large competitor appears and begins to slash prices on high-end and mid-level chips, then the entire industry could qualify as cutthroat. Until then, computer chips represent a superb, quickly growing, highly profitable and promising long-term industry. Not a cutthroat death spiral, as journalists like to paint the entire business. It's unfortunate that some companies chose to focus solely on the low end of the industry and had their lunch handed to them on a wooden plank to the face. But that's their fault, not the result of an industry gone bad. Just as location, location, location matters in real estate, business model matters in business. It usually pays to have a segmented model with a healthy product mix, a la Intel.

To conclude my part of this discussion, I believe that Brian and I are arguing, for lack of a better word, a matter of perspective and semantics. I view the industry as a whole: the computer CPU industry. I view that entire industry very attractively. I see Intel as dominating it. Therefore, Intel is attractive. If I were to agree with journalists who paint the industry as "cutthroat," I would need to rethink our investment in Intel. The Drip Port doesn't want to invest in cutthroat industries. They're not attractive. Intel's industry isn't that yet. One small and increasingly less important segment of it is cutthroat, just as Johnson & Johnson's (NYSE: JNJ) Tylenol faces ever-mounting competition, but overall CPUs are an attractive, dynamic industry.

I'm almost certain that Brian agrees with that. I believe that we're simply conceptualizing the use of the term "cutthroat" differently and applying it to different definitions of "industry."

Touchstone Friday
We're still waiting for our Mellon Bank (NYSE: MEL) statement to include our end of March $100 investment in our numbers. We also sent $100 to Mellon at the end of April, but we don't expect to hear about that for weeks. Toward the end of May, we will likely alter our monthly investment away from Mellon. We have finally sent about as much money to Mellon as to J&J, and almost as much as we have to Intel. We can mix it up some. Meanwhile, at home, we hope that you're saving even more than $100 monthly if you can, and investing it in any companies you wish.

This week was largely spent on Intel, but it began on Monday with George looking at Marriott Corporation. A good Drip candidate? Wednesday and Thursday were spent on Intel following the news that National Semiconductor (NYSE: NSM) is cutting anchor off the low-end chip seas. Bye-bye, NSM, and good luck in new adventures.

Tuesday was more of a beginner's column explaining how Time plus Discipline can lead to Compounding (T + D = C) of even small amounts of money. Please take a moment this weekend to mail this column to any non-Fools (or Fools) who could use it to help them start a Foolish investing career. On the Web, at the bottom of the column, is a very easy "E-mail this Article to a Friend" feature. Please do. Click here for the column, then scroll down to mail it. Show friends and family how small amounts of money can compound -- in effect, show how easy investing can be. If you do send that column, please consider sending this background column on direct investing, too.

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