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Techs weigh on Nasdaq
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April 6, 1998: 2:24 p.m. ET
Worrisome news for Microsoft and Intel drive their stocks down
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NEW YORK (CNNfn) - Microsoft Corp. and Intel Corp. were among the blue chip technology companies weighing down the Nasdaq Composite on Monday, which fell 19.15 points to 1836.25 in midday trading.
Analysts warned that Intel's performance could be a foreshadowing of rough times to come for the semiconductor industry as a whole.
Microsoft (MSFT) shares were down 2-5/8 to 90-3/8 after reports surfaced that the Justice Dept. has gathered enough evidence to launch a new antitrust case against the company.
"I think the government means business this time," said Rick Berry, a technology analyst at Argent Securities. "Also, their stock is trading at 18 times their revenues -- it's extremely overvalued."
Intel (INTC) shares slipped 1-9/16 to 75-1/8 after National Semiconductor Corp. (NSM) announced that it has found a way to combine most chips used in personal computers onto a single chip, which should enable PCs to be priced at less than $500.
Analysts also say that increasing competition from chipmakers such as Advanced Micro Devices Inc. (AMD) and Cyrix Corp. (CRYX), offering low-cost alternatives to Intel's Pentium processor, is chipping away at Intel's dominance.
"The National Semi announcement was a wake-up call for people who don't think things will change," said Drew Peck, semiconductor analyst at Cowen & Co. "This is just another reminder that Intel will not have this business all to itself."
While some analysts say that Intel isn't as indomitable as it once was, they point out that other chipmakers will have a hard time down the road, as well, especially if they continue to target the low-end PC market.
"The action is increasingly in the low end, and that's not profitable for any of the companies," said Thomas Kurlak, a technology analyst at Merrill Lynch Global Securities. "It's not a goal worth aspiring to, it's what the market demands."
Scott Randall, a technology analyst at SoundView Financial Group, said Intel needs to find a way to push consumer demand back toward its high-end processors.
"Intel has identified that their biggest challenge is to create software applications that get people to buy the most powerful processor available," he said. "I don't see anything happening in that regard right now."
Although Intel may be hurt in the short term by the need to cater to the low-end market, that market may end up being a losing proposition for all chipmakers -- except Intel.
"People have gotten euphoric recently on AMD, and that's fine in the near term," said Scott Nirenberski, director, equity research at Deutsche Morgan Grenfell. "But a couple of quarters down the road, they will either fail to execute [their plans] or they'll become more successful, which means Intel will be forced to put a lid on that." 
-- by staff writer John Frederick Moore
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