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Intel delay drags shares
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June 18, 1999: 3:53 p.m. ET
Coppermine chip production put off by two months; shares drop
By Staff Writer Randall J. Schultz
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NEW YORK (CNNfn) - Shares of Intel Corp., the world's top computer chip maker, fell nearly 5 percent after word of production delays with one of its new chips came to light.
In late trading Friday, Intel (INTC) shares dropped 2-5/8 to 55-3/8.
The company confirmed late Thursday that production of a new chip type known as Coppermine would be delayed.
Analysts estimate it would delay the rollout for the chip by two months, to November from September. Coppermine is a 600 megahertz version of Intel's popular Pentium III chip.
In the wake of the revelations, Morgan Stanley Dean Witter analyst Mark Edelstone downgraded his rating for Intel to market outperform from strong buy.
Edelstone also cut his earnings per share estimate to $2.25 from $2.35 for 1999 and to $2.55 from $2.60 for 2000, although Intel said the delays won't affect earnings.
"This is likely to lead to a lower-than-expected average selling price for Intel's overall MPU (microprocessor) portfolio," Edelstone said in a statement.
Competitor Advanced Micro Devices (AMD) seemed to gain a small edge from Intel's woes. Its stock was up 1/2 to 18-7/8 late Friday.
Intel has been locked in a battle with Advanced Micro Devices, among others, in an increasingly competitive chip market. Additionally, the chip sector in general has faced falling PC prices, which have strained profit margins.
Intel, while still the number one semiconductor company, has seen its market share shrink. Two years ago it controlled 95 percent of the retail market, but in the first quarter of 1999 its share stood at 36 percent.
But it may be foolish to count Intel out. Even as he downgraded Intel's shares, Morgan Stanley's Edelstone said he believes "Intel remains undervalued."
Even with the delays, Intel won't be without options, said James Barlage, semiconductor analyst at Lehman Brothers.
Intel's Coppermine chip is being made with a 0.18 micron process, but for the laptop and desktop models it still will have chips made with a 0.25 micron process. Essentially, these 0.25 micron chips will be as fast as the 0.18 micron chips, although they may cost more.
Advanced Micro Devices may have an opportunity, since it plans to roll out its K7 this summer, well ahead of Intel. The K7 chip is designed to run at up to 600MHz, but AMD may not be up to the task.
"Their K7 hasn't been introduced yet either and they haven't had a good history of production," said Barlage.
Additionally, he explained, in November Intel will be able to role out a Coppermine chip that runs at 500MHz, which still will give Intel the opportunity to upgrade their current 400MHz offerings and charge a higher price in the process. 
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