Friday, September 01, 2006

Calls of Note Part 4

- ThinkEquity is upgrading Intel (NASDAQ:INTC) because they have heard it will implement
aggressive cost-cutting measures faster than they had originally thought. While they are still negative on their revenue growth (due to share losses to Advanced Micro Devices (NYSE:AMD), the firm expects margins could radically improve over the next six quarters. With efficiencies at a minimum at the company, in their opinion, cost cutting could add substantially to earnings.

Firm notes they are not upgrading on INTC's new products, and still expect AMD to gain share. Firm raises estimates and price target. Valuation is still a bit heavy, but increasing margins should drive the stock.

Believes INTC will write off much of its low-end inventory. Thinks the majority of Intel's inventory is low-end. Writing this off will likely drive margins higher, even as the cost is taken as a one-time expense. Expects headcount reductions. They believe a reduction of another 9,000 will come in 2H06. Firm also believes INTC's planned Israel and Arizona fabs will be delayed. They have heard deployment plans will more closely match demand. Intel will also likely to attempt to spin off its NOR Flash business. There is little strategic reason to keep this business now that the mobile processor business has been sold to Marvell.

The firm humbly bows their heads to those investors who convinced them that, even here, INTC has good upside potential. Notes they caught the move down to $17, but missed the move back to $19; they believe we can now capture the move from $19 to $23.

Rating change is from Sell to Accumulate. Tgt goes to $23 from $14.

Notablecalls: ThinkEquity's Eric Ross & Eddie Cheung have been making some high conviction calls on chips lately (remember the AMD call couple of weeks ago?). Thats what I want too see coming from analysts. Keep up the good work guys! Regarding the note, I'd be cashing in my chips into the upgrade. But that's just bc of my ultra-st/contrarian style.

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