Analysts cut expectations for AMD, Intel on PC market

The moves come just ahead of AMD's 2008 analyst day, where more information on the company's manufacturing spin-off, Shanghai ramp, and 32-nm plans are expected.

By Suzanne Deffree, Managing Editor, News -- Electronic News, 11/11/2008

Two analysts today trimmed their estimated for AMD Inc and Intel Corp on weaker PC demand and the macroeconomic environment.

"Recent checks into Q4 PC builds with the top five notebook ODMs and top four desktop motherboard makers are significantly weaker than our month-ago checks, and as a result, we are cutting estimates on Intel," Craig Berger, an analyst with FBR Capital Markets, said in a report this morning.

"For Q4, our contacts now expect notebook units to grow 5% sequentially, meaningfully below our month-ago forecast of 12% growth. Q4 desktop shipments are now expected to decline 15% sequentially, meaningfully below our month-ago forecast of a 6% decline. Overall, we forecast Q4 PC shipments to decline around 5% sequentially, below our month-ago forecast of 3% growth," he said.

Berger made similar points on AMD in a separate report.  He further noted that Asian distributors have been lowering inventories on the now global credit crunch.

Barclays Capital semiconductor market analyst Tim Luke also noted weaker PC demand that will impact both AMD's and Intel's Q4s in his reports on the companies this morning.

"Following recent industry checks and in conjunction with our IT hardware team reducing Barclays Capital's global PC forecasts for [calendar years 2008 and 2009], we are adjusting our global MPU model market estimates downward," he said.

The two financial analysts further reminded that AMD is set to host its annual analyst event on Thursday. Luke believes the highly anticipated day could prove beneficial to AMD's sagging share price and reputation, which has been muddied in the last year by losses, layoffs, and restructuring efforts that included the spinning out of AMD's manufacturing operations.

"In general, given modest current expectations, we believe analyst day may be viewed somewhat constructively for AMD shares as we expect new CEO Dirk Meyer to outline strategies for a more narrowly focused AMD whose balance sheet may be less pressured bolstered by 'asset smart' model," Luke said, adding that he expects details on AMD's 45-nm traction, new 32-nm nodes, Shanghai ramp, and new Atom response from the company at the event.

Complementing that, Berger said FBR expects AMD will provide further insight into what its standalone margins will look like after the manufacturing deal is closed (expected in Q1 2009) and could provide an update on its product roadmap.

"On its most recent conference call, AMD noted that its 45-nm Shanghai CPUs for servers began shipping during Q3, with a full-scale launch anticipated in early Q4. The firm's 45-nm CPU for desktops is expected to ship in Q4 and launch into the market in early 2009. We will also look for commentary on AMD's Fusion platform," he said.

AMD, Intel expected to trim Q4 guidances

Both analyst pointed out in their reports that AMD and Intel were among the first semiconductor market companies to provide guidance for the December quarter in their September quarter presentations. Demand has weakened materially since the two MPU market leaders did so in mid-October, and both companies are expected to lower or narrow their respective forecasts in coming mid-quarter updates.

On its end, FBR now expects AMD's Q4 revenues will decline 6.6% sequentially to $1.48 billion, below Wall Street's estimate of $1.6 billion. "We are cutting our 2009 EPS estimate from ($1.02) to ($1.05), which reflects our current revenue reduction and AMD's recently announced 3% headcount cut," Berger said.

FBR also believes Intel's Q4 revenue guidance for sales down 1% to up 7% on a sequential basis is at risk.

Barclays estimated Intel's December quarter sales will come in at the low end of the company's previously stated forecast and that AMD will see sales around $1.5 billion.

AMD announced Q3 sales of just less than $1.8 billion on October 16 and estimates $1.58 billion in Q4 sales at that time. Intel reported Q3 sales of $10.2 billion on October 14 and guided for Q4 sales ranging from $10.1 billion to $10.9 billion at that time.