Lehman: Intel Hot on IDF, But AMD Hotter

By Colleen Taylor -- Electronic News, 9/26/2006

Wall Street watcher Lehman Brothers today weighed in with a preview of this week's Intel Developer Forum (IDF) in San Francisco, expecting a generally "constructive tone" for the event, with a focus on new products and a drive to lower geometries.  

However, the firm was not 100 percent positive on Intel in its research note this morning. Noting that, despite slips in market share, Intel's stock is consistently the top in the industry and that the company has met success with this year's restructuring, the firm nevertheless maintained its preference of chip making rival AMD's financial outlook over the longer term given its unit share gains with key OEMs. Lehman's Intel price target is $23, or 22 times its fiscal 2007 EPS estimate of $1.04. Meanwhile, Lehman's AMD price target is $29, or 21 times its fiscal 2007 EPS estimate of $1.39.

At this week's forum, Lehman Brothers said it expects Intel to announce rapid production ramps with growing market acceptance for its new Core 2 duo processor based desktops, notebooks, and servers. The firm estimated in a research note this morning that 70 percent of performance desktops and notebook PCs are expected be Core 2 duo platforms the year's end. Intel may also announce a swifter transition to 65nm and 45nm process technology, the firm said.

Lehman further expects Intel to introduce new Quad Core PC and server processors almost six months ahead of schedule, and estimates that the new product launches will have price, performance and power improvements of at least 20 percent to 30 percent over prior Core 2 duo solutions.

Additionally the firm expects details to be disclosed on the launch of CSI for servers and an integrated memory controller, housed on the main processor rather than on a separate supporting chip or front side bus, which will provide a direct connection between the processors, reducing latency between the processors associated with the front side bus architecture. CSI, which is set to debut in the "Tukwila" Itanium chip due in 2008, will provide a counter to AMD's HyperTransport technology, the firm noted.

Lehman also forecasted the introduction of low-end Xeon processors this week at competitive price points, and noted that Intel may make changes to the server roadmap with regards to its memory architecture. Intel may pull back from using FBDIMM memory modules and reintroduce registered DIMM's in the low-to-mid range product lines.

The firm also expects Intel to provide updates on the Santa Rosa platform for mobile PCs, which incorporate a Centrino platform based on the Crestline chipset and Merom processor. The importance of Santa Rosa is its use in Windows Vista, as the firm said, and it is likely to be the first Windows Vista mobile platform, raising the importance of graphics capabilities and NAND integration.

Looking ahead to the financial effects of the anticipated batch of IDF announcements, Lehman said  Intel is likely to perform better in over the next few weeks. However, the firm noted, should Intel make changes to its server roadmap, AMD may benefit.

Not content to let Intel have all the buzz with this week's IDF, last week AMD debuted its Torrenza Innovation Socket Initiative, which will allow OEMs to consolidate server offerings for multiple processors to potentially a single platform, and allow third-party silicon makers to create their own socket-compatible chips for AMD's x86 base. The debut, also viewed as an attack on Intel's market share, was met with applause from Wall Street watchers, as well as OEMs. AMD also reportedly hinted last week at a possible upcoming collaboration with Apple Computer.