Merrill Upgrades Intel to 'Near-Term Strong Buy'

Analyst Joseph Osha says Intel's new micron Northwood chip will boost profit margins

Merrill Lynch upgraded Intel (INTC ) to near-term strong buy from buy.

Analyst Joseph Osha says he believes the launch of 0.13 micron Northwood puts Intel in the best competitive position since 1999. He thinks the Street is underestimating the performance Intel will get from Northwood this year. Analysis indicates that the PC supply chain exited Q4 with inventory at five-year lows relative to revenue. Low inventory should underwrite solid volume growth in the first and second quarters, even if demand is only mediocre. He raised his $0.70 2002 earnings per share estimate to $0.73 on higher gross margins, and set a $42 target. Over the long term, questions about Intel's ability to sustain growth remain. He reiterates his long-term buy rating.

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