Citi Cuts AMD, Intel Estimates On Consumer PC Concerns

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Includes: AMD, DELL, INTC
by: Eric Savitz

There were some worrisome comments this morning from Citigroup’s Glen Yeung on the outlook for fourth quarter PC demand. And meanwhile, Dell (DELL) apparently is struggling with a shortage of certain key components.

Yeung this morning cut his fourth-quarter estimates on Advanced Micro Devices (NASDAQ:AMD), asserting that Dell has been reducing orders for processors geared toward the U.S. consumer market. He also slightly trimmed his estimates for Intel (NASDAQ:INTC) to reflect consumer softness. He notes that AMD is about 25% exposed to U.S. consumers, versus 5% for Intel; he also notes that Intel is gaining share in Europe, offsetting U.S. weakness.

Yeung now sees AMD reporting a loss for 2007 of $2.55 a share, versus a loss of $2.35 previously. For 2008, he expects a loss of 55 cents, versus a loss of 10 cents previously. For 2009, he now sees a profit of $1.09, down from $1.15. His Intel 2007 estimate drops a penny to $1.34 from $1.35; for 2008 he goes to $1.71 from $1.72; for 2009, $2, up a penny from $1.99.

Meanwhile, Citigroup hardware analyst Richard Gardner today writes that the company’s revenue for the third quarter appears to be tracking in line with expectations. But he also notes that shortages of LCD displays and notebook casings have negatively affected revenue from the U.S. consumer and small-to-medium sized business markets, “eliminating any potential for upside” to revenue forecasts.

Gardner repeats his Buy rating and $35 target on Dell.

This morning, Intel is off 18 cents at $26.19; AMD is down 14 cents at $13.09; Dell is off 64 cents at $27.31.