In another reminder that Intel's (INTC) Craig Barrett faces a tough challenge when he succeeds Andy Grove as the chip giant's chief executive next month, a Wall Street analyst today initiated coverage of the company's stock with a more cautious rating.
In assigning the "market performer" rating, Terry Ragsdale, an analyst with J.P. Morgan, reiterated many of the concerns that analysts have been expressing about Intel. (Intel is an investor in CNET: The Computer Network, publisher of NEWS.COM.)
"Personal computer buyers are forsaking high performance for low cost, putting pressure on microprocessor prices and margins," Ragsdale said in a research report. "Intel remains the dominant PC hardware technology supplier and is not in long-term decline, but growth is likely to be fairly stagnant for the next year or two."
Ragsdale also noted, as have others, that Intel's earnings for calendar 1998 are likely to be the company's first decline in profits since 1989. He estimated that Intel will earn $3.15 per share this year and $3.85 per share for 1999.
He set a 12-month target price for the stock at $85 per share. Intel stock closed today at 76-3/8, down 1-1/8.
As reported, Barrett is taking the helm at Intel when it faces lower margins and a consumer shift toward low-cost PCs.
This week, during a trip in the Philippines, Barrett agreed that Intel's biggest challenge was to jump-start growth. Last month, Intel said it expected first-quarter revenue to fall about 10 percent below the previous quarter, citing softer-than-expected demand. Barrett said Intel's revenue had been stagnant during the past five quarters.
Reuters contributed to this report.