Intel's Earnings Torpedo

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Exhibit 2First Call Consensus Earnings Forecasts for Intel Before and After the EarningsWarningForecast Period Before AfterThird Quarter of 2000 $0.41 $0.38Fourth Quarter of 2000 $0.46 $0.43Fiscal 2000 $1.72 $1.67Fiscal 2001 $1.86 $1.77Long-Run Growth Rate 22.6% 20.6%
MORGAN STANLEY DEAN WITTERCommentPage 1Equity ResearchNorth AmericaUnited States of AmericaTechnology: SemiconductorsIntel CorpReuters: INTC.O Bloomberg: INTC NASDAQ: INTCMark L. Edelstone+1 (1)415 576 2381Mark.Edelstone@msdw.comJohn CrossLouis P. GerhardySonia KimotsukiChange in RecommendationDowngrading INTC ToOutperformSeptember 22, 2000OUTPERFORMPrice (September 21, 2000): $61.48Price Target: $6052-Week Range: $75.81 - 32.50WHAT'S CHANGEDRating: Strong Buy to OutperformChange of Target Price: $100 to $60Earnings (2000): $1.75 to $1.65Earnings (2001): $1.95 to $1.75• Lowering EPS estimates and rating on INTCTo reflect a 3Q shortfall and our belief that 2001 will be a morechallenging year we cut our estimates and rating on INTC• Weakness in Europe leads to shortfallEurope was well below plan but other regions were solid and webelieve that seasonal demand is improving• Inability to capitalize on near-term EPS potentialWe expected a seasonal uptick in 2H PC demand to combinewith lower cost structure to drive strong 3Q and 4Q results• Transition issues make 2001 more challengingPentium 4 transition and completion of cost reduction programsin 4Q suggest that 2001 EPS results will be less compellingPrice: Abs. and Rel. To Market & IndustryIntel Corporation (Left, U.S. Dollar)Relative to S&P 500 Stock Index (Right)Relative to MSCI O/ELECTRONIC COMPONENTS;INSTRUMENTS (Right)70350603005025040200301502010010500096 97 98 99 00Data Source: FactSet Research Systems Inc.FY ending Dec 31: 1999A 2000E 2001E 2002EEPS ($) 1.16 1.65 1.75 –Prior EPS Ests. ($) – 1.75 1.95 –P/E 53.1 37.3 35.1 –Price/Book 13.2 9.7 7.6 –Market Cap ($ m) 430,667Return on Equity (06/00) (%) 27.7L-T EPS Grth ('00 - '05) (%) 20.0P/E to Growth 1.76Shares Outstanding (m) 7,005.0E = Morgan Stanley Dean Witter Research EstimateQ'trly 1999A 2000E 2001EEPS actual curr prior curr priorQ1 0.29 0.35A – 0.41 0.46Q2 0.25 0.50A – 0.41 0.46Q3 0.27 0.38E 0.42E 0.44 0.50Q4 0.34 0.42E 0.48E 0.49 0.53Company DescriptionIntel designs, manufactures, and markets highperformancemicroprocessor units (MPUs) andrelated chips for the PC market.Please refer to important disclosures at the end of this report.
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Intel's Earnings Torpedo

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