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Merrill Cuts Intel Outlook

Merrill Lynch cut estimates on Intel (INTC).

Analyst Joseph Osha says the first two months of the second quarter were soft, making it tough for him to defend a sequential revenue rise. He notes Taiwanese motherboard and laptop unit shipments look to be flat sequentially in May after a 17% decline in April. He also notes DRAM pricing has declined, and that spot pricing is driven by reduced supply -- not increased demand.

Osha cut his $0.77 second quarter earnings per share estimate to $0.75 on $6.76 billion in revenue. He expects Intel to set the 2003 capital expenditure bar at between $5.5 billion and $6 billion. Despite his estimate cuts, Osha says he expects the stock to trade well through the next few weeks as business recovers seasonally. He also thinks Intel has left a lot of gross margin headroom for later in the year.

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