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Intel's Warning Shocks Investors

Aired September 22, 2000 - 6:03 p.m. ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

JUDY WOODRUFF, CNN ANCHOR: Well, meanwhile, financial markets around the world suffered a bad case of the jitters Friday. Asian investors suffered through a high-tech sell-off while in Europe markets rallied after a bad start by technology stocks.

Here in the United States, the techs took a dive, but blue chips pulled the Dow back into positive territory.

The earnings warning late Thursday from the high-tech bellwether Intel has been a main catalyst for the Friday market swing. The tech- heavy Nasdaq plummeted 6 percent shortly after the opening bell.

CNNfn's Susan Lisovicz reports few companies can move the markets like Intel.

(BEGIN VIDEOTAPE)

SUSAN LISOVICZ, CNN CORRESPONDENT (voice-over): The microprocessor chip is the electronic brain of the personal computer, and no company in the world makes more of those chips than Intel. So when Intel said its third-quarter revenue would grow much more slowly than previously expected, investors dumped Intel's stock, dragging many other shares lower as well.

DAN SCOVEL, NEEDHAM & CO.: We have Intel, which has some 80 percent market share of the microprocessors that go into PCs. So it has a very disproportionate impact in general to PCs, semiconductors, and overall electronics by extension.

LISOVICZ: Compounding the problem: Wall Street's high expectations. Even if a company's growth rate remains solid, investors can punish a stock because they expected better. And nowhere are expectations higher than in the technology sector.

Intel's annual revenue growth rate over the past five years is 14 percent, and its earnings per share growth rate over the same period is 20 percent. And investors have rewarded the stock. At its high in August, Intel's stock climbed 84 percent this year.

JACK GERAGHTY, GERARD KLAUER MATTISON: It's a very, very well- run company. So if all of a sudden the stock gets whacked overnight, you know, remember, it's buy low, sell high.

LISOVICZ (on camera): Even though Intel's shares lost 22 percent of their value in a single trading session, the company's overall stock market value is estimated at $322 billion. Because that value is so high, Intel's power is enormous in the overall direction of stock market.

Susan Lisovicz, CNN Financial News, New York.

(END VIDEOTAPE)

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