Novice Investing - Not Intelligent Enough

Date: Monday 01st 2008f December 2008 04:49:41 PM

Not Intelligent Enough - 03/03/2006

By: Novice Investing Staff

The world largest chip maker, Intel Corp. (INTC), delivered its second earning warning in 45 days. It now expects sales to be in the range of $ 8.7 - $ 9.1 Billion for the first quarter of 2006. This is a far cry from $ 10.1 - $10.5 Billion predicted as recent as two months ago. Consequently, profit margin will be hurt as is often the case for a highly capital intensive business like semiconductor.

The reason for the shortfall is plenty. Intel faces competitive pressure from Advance Micro Device in one side and slackening demand of personal computer in another. It controls about 80% of the microprocessor market found in every personal computer. This segment is maturing now and corporate users are currently waiting for the next upgrade of window Vista before making a huge upgrade of their infrastructure.

Meanwhile, one of its main customers, Dell, is rumored to lose market share. Dell accounts to 19% of revenue for fiscal year 2005. Shares of Intel fell to $ 20 on Friday trading. The threat of AMD is real. AMD had been executing well for the past couple of years. As a result, Intel was forced to remove the display speed of its microprocessor when naming its new chip. AMD simply beat them in terms of speed. Intel nowadays tries different marketing tactic by rebranding itself from "Intel Inside" to "Leap Ahead". That rebranding will cost them a $ 2.5 Billion, enough to build another company with the scale of AMD.

Is it worth it? We don't see the reason to spend $ 2.5 Billion to change your established brand. But apparently, Intel's management saw it differently. Intel has been struggling to remake itself not as a microprocessor company supplying your PC component. For now, the company can afford that much expenditure to rebuild its brand. As of December 31st 2005, it has a positive net cash of $ 15 Billion. That is good enough to sell its chip at a loss for quite some time if it has to.

END
You can view other helpful commentary by clicking here
Distributing your own investing content is easy. Simply, click here.

Disclaimer: The sole purpose of this article is educational. This article is merely the opinion of the writer and is not in any way a buy/sell recommendation regarding Intel Corp. (INTC) or any other securities.

[Resources] [Forum] [Link Partner ] [Novice Investing Directory ] [ Submit Your Article Here ]