intel

INTEL CORP. $16 (Nasdaq symbol INTC; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 5.6 billion; Market cap: $89.6 billion; Price-to-sales ratio: 2.6; WSSF Rating: Above Average) is the world’s largest maker of computer chips, with about 80% of the market. Computer makers Dell and Hewlett-Packard are Intel’s main customers, and accounted for 38% of its 2008 revenue. The recession has hurt computer sales. This, in turn, has lowered demand for Intel’s chips. Moreover, customers are switching to cheaper computers, including “netbooks,” which are smaller than traditional laptops and have less-powerful processors. Intel earns smaller profits on chips for netbook computers than from regular desktops and laptops.

Sales, earnings still below 2005 highs

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NEWELL RUBBERMAID INC., $6.91, New York symbol NWL, has cut its quarterly dividend by 52.4%, to $0.05 a share from $0.105. The new annual rate of $0.20 yields 2.9%. Newell makes plastic storage bins, tools, window blinds, pens and a number of other household items. Aside from Rubbermaid, Newell’s brands include Sharpie, Paper Mate, Waterman and Levolor. The recession is prompting Newell’s customers to switch to cheaper, generic versions of the company’s products. The lower dividend should save Newell about $61 million a year. (In 2008, Newell earned $338.7 million, or $1.22 a share before unusual items.) The company needs the cash to repay $750 million in debt that comes due during the second half of this year. If you include long-term borrowings, Newell’s total debt was $2.9 billion at the end of 2008....

MOLSON COORS BREWING CO., $38.84, New York symbol TAP, reported that its earnings before unusual items rose 1.0%, to $512.6 million in 2008 from $507.4 million in 2007. However, per-share earnings fell 1.4%, to $2.76 from $2.80 on more shares outstanding. The company didn’t report its sales figures, but its beer volumes rose 4%. Molson Coors continues to work toward its goal of cutting its expenses by $250 million a year by the end of 2009. Its plan includes cutting jobs and improving efficiency by outsourcing certain administrative and other back-office functions. So far, the company has saved $178 million. The July 2008 merger of Molson Coors’ U.S. brewing operations into MillerCoors, a new, 42%-owned joint venture with Miller Brewing, should produce an additional $500 million in annual savings by June 2011. Already, the new partnership has cut its expenses by $28 million. These savings will help Molson Coors cope with a drop in sales to bars and restaurants as the economy slows. Retail beer sales usually hold up well during recessions, so the lower costs will also help Molson Coors stay profitable as drinkers switch to cheaper brands....

ALCOA INC. $10.81, New York symbol AA, is down 75% from its recent peak of $45 in May, 2008. That was mainly due to a 53% drop in aluminum prices, from $1.50 a pound in July, 2008 to its current level of around $0.70 a pound. Demand for aluminum from the construction and automotive industries has slowed. The company has now unveiled a new restructuring plan that should help it cope with lower aluminum prices. This plan includes a 13% cut to Alcoa’s workforce, and sharp reductions in capital spending. The company will also lower its production of primary aluminum by 18%, and sell businesses that make aluminum products such as wheels for cars and electrical components. Restructuring costs will reduce Alcoa’s earnings for the fourth quarter of 2008 by $900 million to $950 million. However, the plan should increase Alcoa’s annual pre-tax earnings by $450 million. To put these figures in context, Alcoa earned $299 million or $0.37 a share in the third quarter of 2008 before one-time items....

In the early 1990s, IBM began to lose its decades-long dominance over the computer industry to newer companies like Microsoft (software) and Intel (chips). That prompted the company to focus on selling its expertise. It subsequently sold most of its less profitable operations, including its home computer division. This transformation continues to pay off. Demand for computer services tends to be more stable than other aspects of the computer industry, even in today’s volatile economy. That’s because IBM’s services help businesses cut costs and improve productivity. The stock now trades for less than 10 times earnings. That’s less than half its p/e of around 25 during the last recession in 2001....

NASDAQ-100 TRUST SHARES $28.62 (Nasdaq Exchange symbol QQQQ; buy or sell through brokers) or ‘Qubes’, hold the stocks that represent the Nasdaq 100 Index. This index is made up of the 100 largest and most heavily traded stocks on the Nasdaq exchange. The index reflects firms across major industry groups including computer hardware and software, telecommunications, retail/wholesale trade and biotechnology. It does not contain financial companies. Expenses are about 0.20% of assets. The top 10 highest-weighted stocks are Apple, Microsoft, Qualcomm, Google, Cisco, Intel, Research in Motion, Gilead Sciences, Oracle and Amgen. Nasdaq-100 Trust Shares are a buy for aggressive investors only.

We still think high-quality mutual funds with a long-term focus will beat indexes over long periods. If funds invest as we advise — sticking with well-established companies and spreading their assets out across the five main economic sectors — they will tend to lose a lot less than the market indexes in periods when the indexes fall sharply. That’s because big market slides are particularly hard on the hottest, most popular stocks of the preceding market rise, and investing as we do leads you to avoid excessive investment in the hot stocks. Index funds, in contrast, do tend to load up on the hottest, most popular stocks as they rise. That’s because, as they rise, these stocks make up a rising proportion of the index. The most recent example is Potash Corporation of Saskatchewan, which had the highest market cap on the Toronto exchange in June, 2008, on the strength of soaring fertilizer and agriculture prices. The shares have since dropped 70%....

The Dow’s 11.1% gain on Monday was the fifth-biggest percentage gain on record. Markets remain volatile and have moved down since, but my view is that governments around the world are now taking the kind of steps that will contain the crisis and eventually restore liquidity in the banking system. You can only spot market reversals in hindsight, so it’s too early to declare if we are near a bottom. But even if we are, markets are apt to remain volatile and some stocks are bound to go to lower lows. We recommend that you continue to hold on to good-quality stocks, and that you spread your investments out across the five main economic sectors....

VERIGY LTD. $23 (Nasdaq symbol VRGY; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 60.2 million; Market cap: $1.4 billion; WSSF Rating: Extra risk) makes equipment that chipmakers like Intel, Texas Instruments and Nvidia use to test their products. Verigy’s products help its customers cut down on production errors, and improve their profits. The company designs its test systems itself, then hires a contract manufacturer to make its products. Verigy spends about 12% of its revenue of $12.80 a share on research. This spending has helped it develop testing systems for more complex chips, such as the “system-on-a-chip”, which concentrates a wide variety of functions onto a single chip. Use of this design is expanding, since it helps manufacturers cut costs. This design also uses less power and is more reliable than multiple chip configurations....

INTEL CORP. $22 (Nasdaq symbol INTC; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 5.7 billion; Market cap: $125.4 billion; WSSF Rating: Above average) is the world’s largest maker of computer chips, with roughly 80% of the global market. Intel currently spends about 16% of its revenue of $6.75 a share on research. This spending has led to several highly profitable products in the past few years. A good example is its multi-core processor chips, which let computers perform several tasks simultaneously. The company has also had great success with its Centrino platform for mobile computers. Centrino combines a processor, memory chips and high-speed wireless technology. It also consumes less power than other mobile platforms....