Phil Anthropy

Intel's A Long Term Buy From This Beaten-Down Price

I believe Intel is a long at this point, and has a competitive advantage over AMD. First, there has been no mention I have seen anywhere of the important resolution of the $1 billion dispute with the IRS. I suspect that this dispute arose from a controversy over payment of excise taxes on cpus exported and then returned to the U.S. in imported computers, but I could not find any information on the details of the dispute, so this is just conjecture. Second, Intel is starting a fab in China, and this will eventually result in good profits going forward. Third, AMD made a serious strategic error when the CEO decided to go head to head against Intel in core markets, as opposed to concentrating on notebook and low-end systems, leaving the high end to Intel. An accommodation of that sort could have worked well for both companies. Instead, AMD diluted their resources, and are now playing catchup, which may not be a successful strategy unless they have some brilliant designs in the pipeline. In my mind, there is now a real question about whether AMD can remain a going concern. If they fold, Intel's profits explode. Fourth, the Vista operating system is different enough so that people will probably buy new, upgraded computers to run it. Also, in order to run encryption, people must buy motherboards with new chipsets and a trusted processor module (TPM). The easiest way to do that is just to upgrade the computer. Therefore, I predict a surge in PC purchases for the rest of the year, particularly late in the third quarter, at the end of the federal government's fiscal year, when the flash flood of year-end money comes. Intel continues to have the lion's share of cpu sales, has already reduced their prices to compete with AMD, and has a six month lead on smaller dimension lithography for their chips. Unless AMD pulls a rabbit out of a hat through a monolithic cpu/video/peripherals chip, a "PC on a chip," and I have heard no rumors about such a chip, Intel appears to be well positioned for continued, albeit measured, growth. Disclaimer: All of the above is just my opinion, and all facts should be verified. I have been long Intel recently and sold out to take profits after the recent runup. I will probably go long again if the price dips.