Intel stock weathers storm
Intel shares held relatively steady after the Federal Trade Commission's launch of a formal investigation into the chip giant's business practices.
held relatively steady today after the Federal Trade Commission yesterday launched a formal investigation into the chip giant's business practices, though the chip maker's competitors captured some gains.
Shares of Intel fluctuated within several points during the day before closing at 93-1/8, down 2-1/2 points.
"Perception is a reality on Wall Street and the previous [Intel] investigation was not seen as a problem. So that's why Wall Street's been hands-off," said Michael Geran, an analyst with Pershing.
Other analysts shared the view that the investigation will not burden Intel's balance sheet with costly legal fees, divert its attention from its operations, or create a situation in which the chip giant will have to curtail its business.
(Intel is an investor in CNET: The Computer Network.)
"The costs of fighting an investigation will not be a problem for a company this size," said Dan Niles, an analyst with Robertson Stephens.
Drew Peck, an analyst with Cowen & Co., agreed. He estimated that the legal battle could cost Intel millions of dollars, but pointed out that the company maintains a large legal budget that will easily absorb the costs.
"In the scene of things, this won't be material to the company's financial performance," Peck said. "If the FTC takes specific action against Intel, then it could be serious...even if they are minor actions."
But, Peck said, it's unlikely the FTC will find a "smoking gun" that it could use to take action against the company.
Meanwhile, microprocessor competitor Advanced Micro Devices (AMD) encountered a sharp gain during the day, rising as high as 6.8 percent, before it closed at 32-1/2, up 1-1/4 over yesterday.
And Cyrix (CYRX), which is being acquired by National Semiconductor, also received a slight rise to close at 32-3/4, up * over yesterday. But the jump was not as great as that of AMD, due to the merger, Peck added.
"AMD is up sharply and that's clearly because of the investigation," said Peck. "The news of the investigation is the only thing new today for AMD."
Niles described investors bidding up the stock price of Cyrix and AMD as people who are "willing to take a flyer on it."