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Funds still like Intel
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September 22, 2000: 2:57 p.m. ET
Revenue problems are temporary and price looks attractive, they say
By Staff Writer Jeanne Sahadi
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NEW YORK (CNNfn) - So you don't own shares of Intel directly. That doesn't mean its revenue woes might not hit you where it hurts. At least temporarily.
Intel (INTC: Research, Estimates) is a holding in nearly 1,200 mutual funds, 127 of which have more than 5 percent of their assets invested in the stock, according to data from Morningstar.
 The stock was down $12.63, or 20.5 percent, to $48.84 in record-setting volume in mid-afternoon trade after the company warned that weakening demand in Europe, which accounts for about a fifth of its revenue, will result in third-quarter revenue growth that is drastically lower than expectations.
But fund managers who have placed heavy bets on the stock say the news is not a sign of worse things to come, nor is it necessarily indicative of a long-term problem.
 Rose Papp, co-manager of three Papp funds that are among the top funds with the biggest holdings in Intel, admitted the news "was a surprise. The company on the second-quarter call told people the third quarter was essentially in the bag."
But, she noted, the problem for Intel is really a problem for the PC industry as a whole since PC sales are weak in Europe.
"There's nothing more wrong with Intel," Papp said, noting that even after the revised guidance its revenue was up 17.7 percent from the third quarter a year ago. And, indeed, at its sharply lower share price, she said, "I think Intel is attractive. I think it's a growth stock."
She explained that Intel is advantageously positioned for two key reasons: corporations today can't afford not to invest in computers and technology; and the chip maker puts out unique products that will remain in demand.
"The weakness we're seeing is temporary," Papp said, who further noted that she sold off 160,000 Intel shares for Papp America-Abroad when the stock price was over 70 because the chip maker accounted for nearly 15 percent of the fund's assets at that point. Now the fund has about 11 percent of its assets in the company and, Papp said, "I'm absolutely comfortable with the position."
Euro, oil, double-ordering also factors
Other fund managers also find little reason to sell their positions and are confident Intel's third-quarter problems will not be a big factor in the long run.
"It's an Intel European, double-ordering, higher oil prices, weaker euro phenomenon," said Howard Ward, manager of Gabelli Growth. As of June 30, Intel was the fund's No. 2 holding, accounting for 4.7 percent of assets.
 Dan Niles, a technology analyst at Lehman Brothers, explained that third-quarter demand in Europe tends to be concentrated in the month of September. Customers double or triple their orders to make sure they have enough parts available during that critical period. Intel factors those orders into its forecasts.
"The summer quarter is always a difficult quarter; this one was particularly difficult for Intel especially. They were coming out of a situation where they were completely booked out, and a lot of those orders were double and triple orders. And as soon as those parts became available, people backed away," Niles said.
Joe Belew, manager of Firstar Stellar Relative Value Fund, for which Intel is a No. 1 holding, said one of the fund's analysts recommended being short-term underweight on the stock until European demand picks up - a recommendation Belew characterized as "nothing drastic." He sees the company as long-term attractive since it is not losing market share, its other geographic markets "are on plan or better" and it is not experiencing manufacturing problems.
He expects the company's prospects to improve as problems with the euro and crude oil abate.
To Ward, the precipitous drop in Intel's share price is much ado over very little.
"This is a massive overreaction. Intel at these prices is a great long-term investment for anybody with a time horizon of longer than a couple of months. ... The analysts that universally liked the stock from 75 all the way down to here and now have downgraded it will be upgrading it at a higher price in the next six months."
-- CNNfn.com staff writer Richard Richtmyer contributed to this report
* Disclaimer 
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