Silicon is an asset that Intel can leverage well beyond personal computers to servers and networking equipment, cellular phones, handheld computing devices, smart automobiles and airplanes, futuristic money cards or credit cards, and much more. Billions of items in the world, ranging from tiny to immense, will be graced with computer chips, and Intel should be able to leverage its efficient chip-manufacturing business to serve these new needs better than any competitor in its path.
If you're an Intel shareholder, you recently received the company's 1999 annual report. Page 3 says, "The Internet revolution requires a wholesale reengineering of the infrastructure for commerce and communications. In five to eight years, we believe the world will be linked by one billion connected computers, through tens of millions of servers, generating trillions of dollars of e-commerce. As we shift our focus from a PC-dominated industry to an internet-dominated economy, we are positioning ourselves to provide key technologies to help drive this transformation."
Most important in that sentence: Intel has been shifting from a PC focus to an Internet focus.
Four years ago, Intel recognized that the Internet represents a strategic inflection point to its business. Intel's old focus, the PC, is fading in importance. That may sound counterintuitive in light of the "Internet Revolution" taking place, but the Internet is central enough to many peoples' lives that it is the main focus now, rather than the PC. The PC is merely one way to access the Internet (by some measures, it is a clunky, expensive way), and as we're beginning to see, there are many other smart ways to access the Web (TV, phone, handhelds). Intel wants to be central to all of these Web devices. This is just plain smart.
Thursday, Intel held its semiannual analyst conference. The conference is an admirable event that goes beyond the regular quarterly conference calls to update investors. However, the conference serves institutions and analysts foremost, rather than the thousands of individual investors who own Intel, like you and me. In the future, I'm sure nobody would be happier than Intel if new affordable technology made it possible for anyone in the world to participate in all of Intel's investor-related meetings. The law should require this anyway. (Tell the SEC that you think so, too -- TODAY, through the Fool.) To Intel's credit, the company provides information from the meeting on its website at www.intc.com
Rule Maker Port's Matt Richey will summarize Intel's analyst meeting next week, but I'm going to highlight a few topics from the meeting today. One is the fact that Intel's new Itanium chip, based on IA-64 architecture, is on track for release this fall. The Itanium chip targets high-margin workstation and server markets, where Intel obviously has the brand name to steal market share from leaders like Sun Microsystems (Nasdaq: SUNW). Given its high-growth target market, Itanium should prove very healthy for both margins and earnings growth.
Intel has two other chips due to release in the second half of 2000, code-named Timna and Willamette. Timna is a low-end, single-chip processor that will run at 600MHz or faster, while the new high-end Willamette chip will run at speeds of 1.4GHz. GHz stands for gigahertz, instead of megahertz. A gigahertz represents 1 billion cycles per second, while a megahertz represents 1 million cycles per second. Both new chips should be available before the strong-selling periods in the fourth quarter.
In other news refreshed during the meeting, this year Intel will release an Intel-branded Web access machine something like Oracle (Nasdaq: ORCL) thought of four years ago -- Oracle probably wasn't wrong in creating its Web PC device; it was probably early. Eventually, inexpensive Web access machines will likely grace several rooms in many American homes, including the garage and even the backyard (a weatherproof version). You will want to easily look up information on the Internet while working on your car in the garage, for example, or while tending your garden or building a birdhouse.
If you received Intel's annual report this month, take a few hours to read it start to finish. You'll understand your company that much better. (The annual report is online, too.) Johnson & Johnson (NYSE: JNJ) shareholders just received an annual report, too. Read that puppy as well! It is excellent. However, do keep in mind that annual reports tend to be weighted toward the positive and don't discuss risks with equal verve. Our companies don't mean to deceive us, I don't think. Instead, I believe this happens partly because we invest in great companies that are run by optimistic, "can-do" men and women. So, as investors, we should remember the risks while reading, but do read the reports!
Again, Matt will have more on Intel next week in the Rule Maker. To close today, our next $100 will be sent to Mellon Financial (NYSE: MEL) on Monday. It seems that whenever we send money to Mellon, the stock rises before we buy it. Let's hope this time the opposite occurs! How about a price below $30!
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-- Jeff Fischer, TMF Jeff on the boards
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