August 22, 2003

More Good News About the Third Quarter

Real investment in high-tech equipment has been running at a world-record pace for several quarters now. But what's different about this piece of good news is that demand is finally strong enough for capital-equipment producers like Intel to actually make some money:

WSJ.com - Chip Maker Intel Raises Outlook for Sales, Margins: Intel Corp. raised its outlook for the third quarter, citing strength in its personal-computer microprocessor business, and said its profit margins will be better than previously forecast. In early trading Friday, shares of Intel were up $2.08, or 7.9%, to $28.47 on the Nasdaq Stock Market. Speaking in a conference call, Chief Financial Officer Andy Bryant said the company raised its revenue targets after experiencing higher-than-expected microprocessor shipments in July and the first couple of weeks of August. He said that microprocessors, chipsets and motherboards are "unexpectedly strong" across all geographic regions and channels. He noted that customer inventories remain lean, signaling that customers' products are also selling well. Intel felt that this change was "big enough" that it had to tell investors about it, he said. Intel made its announcement two weeks ahead of its regularly scheduled midquarter update, which is slated for Sept. 4...

Posted by DeLong at August 22, 2003 08:55 AM | TrackBack

Comments

"In early trading Friday, shares of Intel were up $2.08, or 7.9%, to $28.47 on the Nasdaq Stock Market."

The problem is that Intel is up nearly 90% since its Feb lows. This news, and then some, is already priced in.

Posted by: Pooh on August 22, 2003 09:31 AM

"What's different about this piece of good news is that demand is finally strong enough for capital-equipment producers like Intel to actually make some money."

Huh. Intel has been making lots lots lots of money. I am not sure what is meant by this. Many tech companies have been making fien investment returns, the only issue in investment is whether you happened to like the price you have had to pay for those earnings.

Posted by: anne on August 22, 2003 11:56 AM

Surprise -

http://www.nytimes.com/2003/08/22/national/22AIR.html

A new Bush administration regulation would allow thousands of older oil and power facilities to make extensive upgrades without having to install new antipollution devices.

Posted by: lise on August 22, 2003 01:23 PM

Allright, Intel was good news, but now (22:30) CET, incices are still down, and govvies are up. Sorry anne for picking at you, your stocks vs bond position have performed fantastic since my last sour comment about it, lost a little today though (East Coast Time). Philly Fed looked well yesterday in terms of prod. + orders, but employment and capex were flat, so I guess what has become according to V. Postrel and Econlog, the "Bradford DeLong" view (productivity growth outpacing cyclical contractrion) is confirmed.

Thank you all, have a wonderful weekend, Fermented Herring Seasonal Greatings From the Taiga!

Posted by: Mats on August 22, 2003 01:29 PM

Invesment up - after taxes cut on

Posted by: Giles on August 22, 2003 02:43 PM

Taxes cut on dividends - then investment rises. Wierd. But I'm sure Krugman will be able to tell in the times how the cost of investing and the descision to invest are completely unrelated.

Posted by: Giles on August 22, 2003 02:45 PM

Taxes cut on dividends - then investment rises. Wierd. But I'm sure Krugman will be able to tell in the times how the cost of investing and the descision to invest are completely unrelated.

Posted by: Giles on August 22, 2003 02:50 PM

Taxes cut on dividends - then investment rises. Wierd. But I'm sure Krugman will be able to tell in the times how the cost of investing and the descision to invest are completely unrelated.

Posted by: Giles on August 22, 2003 02:55 PM

I'm not sure that Intel makes capital equipment. Their microprocessors are used directly in consumer electronics. They don't make the equipment that makes the chips. The real question is, "are they investing in new fabs?"

Posted by: Josh Halpern on August 22, 2003 04:56 PM

I think you'll find that most economists classify computers as capital equipment - intel also goes into office computers after all.

Posted by: Giles on August 22, 2003 06:54 PM

By that definition staplers are capital equipment. Chairs depreciate over seven years, computers over five. Given Moore's law, that is an overestimate.

At our gracious host's institution, equipment must cost over $1500 and have a lifetime of more than a year. There are a lot of computers with P4s inside than cost less than $1500.

Falling costs, rapid obsolescence and the large fraction of sales for home use argue against considering PC/Apples as capital items.

In any case CPUs are components, not computers

I would be a lot more impressed if Intel announced it was opening new production lines for its current range of products.

Posted by: Josh Halpern on August 22, 2003 08:32 PM

"Taxes cut on dividends - then investment rises. Wierd. But I'm sure Krugman will be able to tell in the Times how the cost of investing and the descision to invest are completely unrelated."

This is a bizarre statement. The tax cut on MY stock dividends may alter my investment portfolio but does not alter Intel's or Microsoft's or Cisco's investmenting. Duh. Of course, a Princeton Professor of Economics like Paul Krugman would be too shill and ignorant to know or learn this. Duh.

Love those radical rightees. Duh.

Posted by: jd on August 23, 2003 09:31 AM

Could this reflect increased DoD spending?

Posted by: Charles on August 23, 2003 03:16 PM

Applied Materials makes capital equipment....but Intel? What is the standard definition of capital equipment?
rt

Posted by: richt on August 23, 2003 06:20 PM

"This is a bizarre statement. The tax cut on MY stock dividends may alter my investment portfolio but does not alter Intel's or Microsoft's or Cisco's investmenting. Duh."

Unless, of course, you change your portfolio by investing more than you would have otherwise because your after-tax return on investment has risen -- thus lowering the cost of capital to Intel and the rest, and giving them good reason to change their 'investmenting'.

"Of course, a Princeton Professor of Economics like Paul Krugman would be too shill and ignorant to know or learn this. Duh."

So you are saying that Krugman would say that taxes on investments have no effect on the amount invested in them -- and that portfolio changes made by investors have no effect on the 'investmenting' of the firms that they invest in?

With multiple "Duhs" added for emphasis, eh?


Posted by: Jim Glass on August 23, 2003 08:39 PM

Duh. More dividend tax cuts be the answer. Duh. Cut my tax on dividends and watch Intel spending and stock price soar. Duh. Paul Krugman wrong wrong wrong. Must get rid of tenure. More dividend tax cuts. Warren Buffett wrong as PK. Trolls be so impressive.

Posted by: jd on August 24, 2003 07:27 AM

Wow, we really like to talk about taxes, don't we. I would like to point out that the original point was about "real" investment in capital. If, as Mr Greenspan points out, a price decline on a commodity is like a tax cut to its users, then the pace of price decline on computer power represents a huge tax cut for computer users. When you know that, you know all you need to about what is fueling the boom in "real" investing.

Posted by: K Harris on August 25, 2003 08:00 AM
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