Revenue growth is decelerating rapidly, and a trough isn't expected until the third quarter of 2001, ... Based on semiconductor industry data for November, we also lowered our projection of the global industry's growth rate in 2000 to 36 percent from 40 percent.
Demand for PCs is weak and microprocessor prices are becoming more aggressive, ... To stimulate PC demand and improve Intel's long-term competitive position, we believe the company's Pentium 4 price cuts will become more aggressive.
There is nothing like this drop since 1985. But the market should turn up by the first quarter of 2002, when the year-over-year comparisons should be easier for companies to beat.
This is likely to lead to a lower-than-expected average selling price for Intel's overall MPU (microprocessor) portfolio.
We believe PC demand remained sluggish in October and Intel is facing a more challenging competitive environment.
The quarter was quite solid and pretty much in line with our expectations. We think this is a positive for the whole group and we are quite positive on the sector for 2000.
We expect seasonally normal PC demand and a richer product mix to drive a positive first quarter earnings surprise. PC demand should accelerate in the second half of 2000, (driven by) a strong economy, Windows 2000 and a sharp increase in microprocessor price performance.
Coupled with weak PC demand, we believe Intel faces significant product transition risk to its next generation Pentium III microprocessor without a good cost structure in 2001.
The key issues to watch from here would be the negotiations and litigations with other DRAM suppliers.
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