Between the Lines

Worries about Intel, AMD demand abound

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Intel cut its first quarter gross margin forecast to roughly 54 percent from about 56 percent due to lower prices for flash memory chips. Meanwhile, analysts have been cutting estimates for AMD based on worries about processor demand. Add these moving parts up and you have a double whammy of worry for the chip sector. On the Intel (all resources) side of the equation, Canaccord Adams analyst Bobby Burleson said in a research note that the chip giant's argument that flash pricing hurt gross margins is plausible, but probably not the whole story. "We believe demand for microprocessors has also likely been challenging. Checks from Asia show a tough environment for microprocessors," wrote Burleson. Meanwhile, AMD worries are prevalent. On Tuesday Bear Stearns analyst Andy Neff wrote the following in a research note:

Following our recent channel checks in the PC supply chain, we believe overall industry MPU sales for 1Q are tracking marginally, but not significantly, below expectations in January. The incremental weakness in MPUs is impacting AMD to a much greater extent than Intel. Our checks clearly indicate AMD is losing share to Intel in 1Q, particularly in the value desktop segment. Intel has been aggressive in pushing its Pentium dual-core products, where it implemented price cuts of 10-15% in January, which is negatively impacting demand for AMD's lower-end desktop Athlon 64 X2 products. Our checks also indicate there has been a systemic delay in new product schedules at AMD, across server, desktop, and notebooks, which could lead to continued competitive issues for AMD in 2Q.

In another research note on Monday, Oppenheimer analyst Rick Schafer also predicted that AMD's quarter is tracking below normal seasonal patterns. He cited channel disruptions in China and Russia. He also argued that the Dell OEM relationship has cooled off--a point that both companies deny. In many respects, AMD is in a holding pattern until it can get volume shipments of its Barcelona platform rolling (all resources). That should happen in the second quarter, but the wild-card is macroeconomic factors. Meanwhile, AMD is keeping things moving. The company said Tuesday that it demonstrated its first 45nm quad-core chips running multiple operating systems and applications (see Techmeme). The demonstration occurred at CeBit in Hannover, Germany. John Morris also adds that AMD--along with Intel--have new notebook platforms on tap.

posted by Larry Dignan
March 4, 2008 @ 7:49 am

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Worries about Intel, AMD demand abound

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