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Analysts mixed on Intel

Wall Street is giving the chip giant mixed reviews as the overall chip market continues its slump.

Wall Street analysts can't seem to agree whether semiconductor giant Intel is a good buy or not.

The bellwether chipmaker was downgraded by an influential analyst yesterday while Piper Jaffray analyst Ashok Kumar today upgraded the company's stock to "strong buy" from "buy" on the strength of increased sales and faltering competition.

"We expect units in the third quarter to be up a strong 11 percent sequentially," Kumar wrote in his report. "The Celeron?will displace Advanced Micro Device's K6-2 and help Intel regain 85 percent of the [Windows-based PC] market. AMD's inability to supply K6-2 350MHz in volume is aiding Intel."

He expects average selling prices to be stable with quarterly revenue 4 percent higher than the year-ago period.

Kumar raised his third-quarter Intel earnings estimate to 80 cents per share--seven cents higher than the consensus--from 78 cents per share. Wall Street generally expects Intel to post profits of 73 cents when it reports its financial results October 13, according to First Call. (Intel is an investor in CNET: The Computer Network, which publishes News.com.)

"The outlook for the company is the strongest it has been in the last few quarters," Kumar concluded

Just yesterday, however, Merrill Lynch analyst Tom Kurlak downgraded the chipmaker to "long-term neutral" from "long-term accumulate." Kurlak also has a "near-term neutral" rating on the stock.

Intel has a shortage of low-end microprocessors and "ample" high-end chips, a skewed mix that could force third-quarter sales to fall below expectations, Kurlak wrote in his report.

He said Intel's growth is slowing and average selling prices will fall 33 percent over the next five years.

"Intel's stock is rich relative to our estimated future earnings growth rate of 7 percent," Kurlak wrote. "It is not rich relative to its past growth rate of 30 percent and, therefore, investors are reentering the stock expecting a resumption of the past trend in 1999. We do not believe that this expectation is well supported by analysts and it ignores the reasons for Intel's current malaise."

The entire semiconductor industry has been mired in slump for months as the Asian economic crisis, slowing PC demand, oversupply problems, and fierce competition have led to lower average selling prices.

Some analysts have predicted the third or fourth calendar quarter will be the bottom of the downturn for the chipmakers. But others say the impact of the Asian turmoil has not yet been determined and the sub-$1,000 PC market will continue to pull down profit margins.

Yesterday's downgrade sent Intel and other chipmakers downward. The stock slipped nearly 4 percent.

Intel stock closed down more than 1 percent today at 84.9375 in a generally weak market. Shares have traded as high as 101.25 and as low as 65.6562 in the past 52 weeks.

Reuters contributed to this report.