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Analyst reports: No consensus on Intel, i2

Analysts release an uncharacteristically large batch of research reports, but their cautiously worded recommendations to investors seem, as a whole, inconclusive.

    Analysts released an uncharacteristically large batch of research reports Wednesday morning in the wake of third-quarter earnings, but their cautiously worded recommendations to investors seemed, as a whole, inconclusive.

    Nine analysts drafted reports on Intel, which on Tuesday reported third-quarter net income of $2.9 billion, or 41 cents a share, not including acquisition costs. That represented an increase of approximately 52 percent over the same period a year ago.

    The Santa Clara, Calif.-based microprocessor company reported record revenue for the quarter of $8.7 billion. Including acquisition costs, net income came to $2.5 billion, or 36 cents a share, up 72 percent from the third quarter of 1999.

    Those numbers beat the relatively meager expectations of analysts, who thought the company would report earnings of 38 cents a share, or roughly $2.7 billion. According to the consensus estimate from First Call/Thomson Financial, analysts believed revenue would be approximately $8.6 billion.

    Intel shares have been climbing modestly since the quarterly results were released--a possible indication that analysts and other investors were relieved to see that the company's late-September revenue warning was not as bad as had been feared. The warning caused Intel's stock to tumble about 40 percent and sapped enthusiasm for the broader technology market.

    Despite a major plunge on the Nasdaq in early trading Wednesday, Intel shares have manage to carve out an 8 percent gain since Tuesday's closing price, trading at $39.25.

    In a research note from New York-based Lehman Brothers, analysts hailed Intel's "surprisingly solid results" for the third quarter and raised fiscal 2000 earnings-per-share estimates.

    First Allied raised Intel to "strong buy," while ABN AMRO upgraded it from "hold" to "outperform." Chase Hambrecht & Quist raised Intel to "buy," while Wasserstein Perella and UBS Warburg maintained "buy" ratings.

    But analysts were not uniformly bullish on Intel. Needham retained a "hold" rating, while Prudential Securities reiterated a relatively tepid "accumulate" rating.

    "While we believe Intel is vulnerable in the near term to a price war with AMD," Prudential analysts wrote in a report Wednesday morning, "we believe Intel should weather this threat fairly well given its edge in chipsets and the fact that AMD has had limited success in the corporate PC market."

    Merrill Lynch downgraded the stock from "long-term buy" to "long-term accumulate," and Credit Suisse First Boston cut Intel from "strong buy" to "buy."

    i2 Technologies was also in an ambivalent analyst spotlight Wednesday, a day after the software maker announced that its third-quarter loss widened despite rising sales.

    i2 announced Tuesday a third-quarter loss of $755.7 million, or $3.83 per share, compared with net income of $5.7 million, or 3 cents per share, in the same period a year ago. Revenue rose to $319.5 million from $146.3 million in the same period a year earlier.

    Excluding non-cash charges and other costs, the company earned 12 cents per share, 2 cents better than analysts expected, according to First Call.

    i2's flagship product is TradeMatrix software, which provides business-to-business e-commerce planning, procurement, commerce, fulfillment and other services. Clients include IBM, Toyota Motor and Volkswagen.

    Analysts seemed to struggle with definitive conclusions based on the quarterly results. Shares of Dallas-based i2 inched up a modest 1.77 percent in midday trading to $183.25, up $3.19 since yesterday's closing bell.

    Southwest Securities reiterated an unenthusiastic "neutral" rating. Brokerage house Robinson-Humphrey maintained its "buy" rating on i2 but issued a research note that highlighted a trio of serious concerns for the company.

    Most troubling to Robinson-Humphrey researchers was that i2 had only 55 salespeople in the third quarter, far fewer than the 125 it said it wanted to add. In addition, the company's deferred revenue increased a scant 4 percent to $164 million, despite strong sales.

    "We believe that these results provide strong validation that (i2) is emerging as the blue chip B2B software provider," wrote analyst Chris Rowen. "Nevertheless, we believe several minor issues arose from the Q3 call...We believe the strong performance of (i2) stock amid broad Nasdaq weakness has created a climate in which these small issues may draw unwarranted near-term scrutiny."

    Despite that rather drab report, Dresdner Kleinwort Benson, C.E. Unterberg Towbin, Chase H&Q, UBS Warburg, Deutsche Banc Alex Brown and J.P. Morgan reiterated "buy" ratings.

    Needham reiterated a "strong buy" rating, while analyst Melissa B. Eisenstat at CIBC World Markets reiterated her "buy" rating and increased her 12-month target price to $200 from $170 per share.