AMD's Troubles Are Making Intel Investors Nervous

Intel (INTC) shares are losing ground following last night’s Q1 revenue warning from rival Advanced Micro Devices (AMD). The issue is simply this: do you think AMD’s miss is all about share loss to Intel, or does it reflect weaker demand for PCs overall?

A number of analysts today commented on that question. Several trimmed estimates on concerns about slowing PC demand. Others say Intel is doing just fine. Here’s a brief roundup, starting with the bulls.

• Glen Yeung, Citigroup: Intel will not miss Q1, he says. Yeung says Intel has been a share gainer in Q1. “Demand in the quarter was skewed to notebook, a mix that favors Intel given their share dominance and margin benefit,” he writes. Yeung also notes that AMD appears to be losing share with Dell (DELL) to Intel.
• Daniel Berenbaum, Caris & Co.: He thinks Intel will be “close to the mid-point” of its Q1 revenue guidance, and guide close to normal seasonality for Q2. On the other hand, he says there is no need to jump in with both feet, given a mix shift to low-end processors, a difficult NAND flash market and a cloudy PC demand environment for the second half.
• John Lau, Jefferies: Lau says Intel remains “well positioned to gain market share.” He maintains a Buy rating, but cut his price target to $28 from $30. He also trimmed estimates. For 2008, he now sees $1.41, down from $1.51. For 2009, he sees $1.70, down from $1.87. For the March quarter, he goes to $9.59 billion in revenue and 29 cents a share, from $9.9 billion and 31 cents.
• Krishna Shankar, JMP Securities: He trimmed estimates on Intel today to reflect a slower PC growth environment. He now sees 2008 EPS of $1.25, from $1.30. For ‘09, he goes to $1.35, from $1.38. He expects Q1 EPS of 28 cents, with Q2 revenue guidance of flat to slightly down.
• Y. Edwin Mok, Needham: He keep his Hold rating on the stock. “While AMD continues to suffer from competitive and operational issues, we believe the latest AMD pre-announcement also reflects weakness in desktop demand,” he says. Mok also thinks Intel could see a mix shift toward the low-end this year as consumers move toward cheaper PCs in a slower economy.

Intel today is down 67 cents, or 3.08% to $21.08.

Comments

[locke:]

Right now, Intel simply has a superior product line. I would be surprised if they were not eating away at AMD. I say this as a computer engineer, not as a finance guy.

2008 Apr 08 07:34 PM

[andrewpmk:]

I have to agree with Locke. AMD has been in trouble for years. Its technology is greatly inferior to Intel's and it has spent a lot of money in the last few years trying to catch up to Intel's R&D machine (without any real success). Its acquisition of ATI hasn't helped - it has already written off $1.6 billion of its goodwill - and with Intel entering that market they might have to write off even more. Intel's revenues will inevitably go down somewhat due to the recession but increased market share and new markets (graphics cards, ultra-mobile processors) should counteract that somewhat. The computer industry as a whole is not in trouble so selling Intel because AMD is losing even more money this quarter is foolish.

2008 Apr 08 11:33 PM

[appledeadmoney:]

I don't think INTC is going to make it out of this quarter alive. There really is no real buyer conviction seen in the stock at these levels. I believe it will retest its lows and will probably use the quarter earnings report to do it. The whole semi industry is being shelled one final time as the final shakeout for it may be at hand. I would definitely wait until after the quarter to take any position. AMD investors will get a scare over the next coming weeks as well, but this company along with the whole sector will see nice gains over the next 18 months.

Too much bearishness and doom being laid upon this sector. At these price to book ratios, you would swear man was going to stop using technology and semis cold turkey.

2008 Apr 09 01:21 AM