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Intel Corporation
Re: I placed my bet!

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By CorporalCarrot
August 5, 2004

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Jack

I am a fellow INTC long but am strongly considering my position. I also happen to be long AMD with no intention of changing my position.

Up until recently I have always thought of INTC as a "safe" investment for most of the reasons you outlined above. It had a virtual monopoly position, strong balance sheet with buckets of cash and little debt, dominated a growth area (and despite the fact that the semis are getting hammered at the moment, PC's are here to stay). Accordingly I always felt this was a stock I was content to own and not worry about short term blips since in the long run, I KNEW it would come up again.

I'm not so sure about that any more. I think Intel has lost its way recently, in a manner very similar to another fallen giant, Nokia, which through either complacency or arrogance has managed to steal defeat from the jaws of victory. I know that Intel has had hiccups in the past, and through sheer might managed to overcome these problems. Not any more.

Intel's main competitor, AMD, which is just a minnow really by comparison, has been snapping at its heels for a few years now. Up until now AMD has been nothing more than a fly irritating the great buffalo. With a quick swish of its tail and throwing $bn's around into R&D, Intel was able to re-establish competitive or marketing advantage. Recently however, Intel has had four or five major technological stumbles and product delays. It has (on balance) lost the performance crown to AMD, has definitely lost the price/performance war, and in terms of innovation, AMD's transition to 64 bit will, I believe ultimately be seen to be visionary. Who would have thought AMD could beat Intel to that???

Intel's decision to now drop clock speed numbering is IMO an official acknowledgement that its policy with the P4 of just ramping up the clock speeds of an inefficient architecture to appear, for marketing reasons (for the uneducated at least), to be faster than AMD, is a failure. Meanwhile, AMD was forgetting clock speed, realizing that major increases in clock speeds without efficiency improvements yield only marginal incremental performance increases. AMD therefore concentrated on architectural improvements, making its processors more sophisticated and efficient and this is now yielding benefits.

AMD is capturing more and more server market share, and recent benchmarks prove their chips are dominating Intel in most areas (other than video encoding). Its recent Sempron launch has been well received, offering good performance with lower heat production than comparable mobile Pentiums.

So all is not rosy for Intel any more IMO. It needs to seriously get its act together on the R&D front if its to maintain its position.

All that said, Intel is not going away any time soon. AMD is still years away from becoming anything like as omnipresent as Intel, and with its phenomenal balance sheet, who's to say Intel won't dominate again?

My only fear is that, like Nokia, we could be in for a 2 or 3 year period where the share price stagnates, and in considering selling for the moment I am basically saying I think there are better places for my money at the moment that will yield higher returns faster.

C


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