After a very long absence Merrill Lynch has finally come up with a research report on the semis and | INTC Message Board Posts

Intel Corporation

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Msg  213 of 302  at  2/5/2011 6:53:02 PM  by


After a very long absence Merrill Lynch has finally come up with a research report on the semis and Intel

All one can say, what a bunch of idiots over at BofA - ML.

First, here is an article from Barron's.

OK, so BAC/ML thinks Texas Instruments is better -- but why ? Because of TXN's 2011 P/E of 13. Clearly he/she thinks that a forward PE of 13 is better than the forward P/E of 10 for Intel. Must be that new math, LOL.

OK, so here are the ML words.

Tablets become more personal than PCs
Intel is a high quality tech powerhouse and an attractive core holding, but faces a maturing PC market, as mobile gadgets with attractive ecosystems increasingly subsume the tasks traditionally done with PCs. Downside is limited at 10x PE, but for the stock to meaningfully appreciate we need either improving PC trends, or tangible progress in mobile smartphone/tablet offerings. We reinstate coverage with a Neutral and $24 PO, about 15% total return including solid 3.4% dividend.

What we like
Near-term stability as channels are lean from chips under shipping PCs for last few quarters. Intel’s new Sandy Bridge chip with improved graphics capabilities could spur replacement cycle. New $10bn share buyback plan. Weak competitor in AMD who could face more pressure as Intel's 22nm products launch in late 2011. Underappreciated server dominance (20% of sales, 50% op margins) that strongly benefits from surge in web-connected devices.

But watch for longer term risks
The smartphone/tablet apps processor market is only $6-7bn TAM vs. Intel's
$44bn sales and may not be enough to move the needle even if Intel finds a
foothold. ARM community is getting bigger and stronger and could put Intel on
defensive (longer-term) in high margin servers and traditional PCs. Possible
gross margin pressure and volatility from recent 73% capex bump for 2011.

Scenario analysis suggests $19 to $30 range, our PO is $24
We estimate about -13%/14%/42% downside/baseline/upside potential from
current levels. Next catalysts include possible low power Atom mobile chip at
MWC Barcelona conf (Feb), Asia PC data points (next few weeks), and launch of
next generation of servers in March/April.

OK, let's go to the next part of this report. Here they list last year's eps and provide their estimates for future eps and compare to wall street consensus.

Here is the kicker - BofA / ML indicates that the total eps for FY 2010 for Intel was 1.97 vs. the actual and real 2.05. Let's see - ML completely missed the financial closure of Intel buying the wireless services of Infineon and they missed the regulatory approval for the MFE purchase. No wonder BofA and ML had to bailed out by the tax payer.

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