Intel Pt. 1: Is Intel Immune?


If you want to spark a heated argument among traders just talk about chips. Few areas of the market are as vexing as this one. Just take a look at this chart of the Semiconductor HLDRs(SMH) which, over the last month, lost approximately 23%.

Of course the entire market suffered over the last 30 days but many investors thought this corner of technology might provide at least a ray of optimism. That didn’t happen, largely because chip makers have never really harnessed the power of their margins due to price wars and a glut in the market.

However, not all chip makers are created equal. While Texas Instruments confirmed fears that the credit crunch remains a terrible advisary Intel said last week it had the best third quarter in the company’s history. And on Tuesday they said the market for notebook PC’s should remain strong into next year.

What does Intel know that the other guys don’t?

“We look at the same economic indicators as everyone else but we also look at our real time sales data from our customers and distributor channel, says Intel CEO Paul Otellini. And that looks positive. The numbers “are showing pretty good signs. So far steady as she goes.”

Intel's Revenue Breakdown 3rd Quarter '08

Desktops: 29%
Notebooks 33%
Servers 11%
Chipsets 21%
Flash Memory 3%
Network Processors 3%

SOURCE: Craig Berger, Friedman, Billings, Ramsey, & Co. Inc.

Also it doesn’t seem as if the credit crisis has a direct impact and Intel’s ability to make strategic moves. According to Otellini, “We don’t borrow money to finance our factories. We pay for it out of cash flow. We had $3 billion last quarter. So we’re in great shape to make investments without ever having to go to the Street for money. That’s one of the core strategies of the companies.”

“What we have to do is focus on where the markets are going,” Otellini tells the traders And what he’s come up with gives Intel a buffer no matter which way the economy blows.

Curious? Click here for Pt. 2 of our exclusive interview with Intel CEO Paul Otellini

Got something to to say? Send us an e-mail at and your comment might be posted on the Rapid Recap. If you'd prefer to make a comment but not have it published on our website send those e-mails to

Trader disclosure: On Oct. 21, 2008, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Adami Owns (AGU), (BTU), (C ), (GS), (INTC), (MSFT), (NUE); Macke Owns (UUP), (MCO), (MSFT), (SDS), (BNI); Finerman Owns (GS): Finerman’s Firm Owns (MSFT); Finerman’s Firm Owns (DNA) Call Spreads; Finerman’s Firm Owns (OIH) Puts; Finerman’s Firm Is Short (IYR), (IJR), (IWM), (MDY), (SPY), (COF), (BBT), (USO): Najarian Owns (EMC), (BNI): Najarian Owns (AAPL) And Is Short (AAPL) Calls; Najarian Owns (AXP) Put Spread; Najarian Owns (FCX) And Is Short (FCX) Calls; Najarian Owns (MS) And Is Short (MS) Calls; Najarian Owns (RF) And Is Short (RF) Calls; Najarian Owns (MSFT) And Is Short (MSFT) Puts; Najarian Owns (CAL) And Is Short (CAL) Calls; Najarian Owns (MGM) And Is Short (MGM) Calls; Najarian Owns (BNI) And Is Short (BNI) Calls with wires