Will Intel Continue to Lose Server Market Share?

| About: Intel Corporation (INTC)

Intel (NASDAQ:INTC) competes primarily with AMD (NYSE:AMD) to sell server processors to server makers like Dell (NASDAQ:DELL), HP (NYSE:HPQ) and IBM (NYSE:IBM). We estimate that the server processor business constitutes 24% of the $22 Trefis price estimate for Intel’s stock.

We estimate that Intel had nearly 88% processor market share amongst the 15 million server processors sold in 2005 and that this figure declined to as low as than 70% in 2008. The historical loss is attributable to Intel’s high-end server chip, Itanium, which required customers to rewrite software to get the most out of it and led to an increasing number of customers preferring AMD server processors.

Although we estimate that Intel has recouped some of the lost server processor market share since 2008, we forecast that Intel will continue to lose share over the long-run to AMD. Some of the high-performance server processors offered by AMD consume less power and have a lower cost of ownership compared to similar chips from Intel making AMD chips attractive to many server processor customers.

We estimate that Intel’s market share will reach 67% of the 30 million server processors sold by the end of the Trefis forecast period. However, you can modify our forecast for Intel server processor market share above to see how the company’s stock would be impacted if instead it were to recoup all of its previously lost market share.

For additional analysis and forecasts, here is our complete model for Intel’s stock.

Disclosure: No Positions