Here is the BoA's Opinion on AMD and INTC (appeared on Barron's )
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HURSDAY, JUNE 8, 2006 3:01 p.m. EDT
INVESTORS' SOAPBOX PM
Pricing Pumps Up Intel
Banc of America Securities
CONVERSATIONS WITH MOTHERBOARD vendors/channel partners suggest that personal computer demand remains somewhat sluggish thus far through the second quarter, with no signs yet of an imminent pickup.
Most vendors, however, remain optimistic about a seasonal pickup in the third quarter, stoked in part by the hiatus of Intel processor price cuts and the concurrent launch of new processors and platforms by Intel (rated at Buy with a target price of $25.00) in late July.
With Intel's Pentium D and Celeron products now priced below comparable offerings (Athlon and Sempron, respectively) from Advanced Micro Devices (rated at Neutral with a target price of $34), our conversations suggest that Intel has proved somewhat successful in clearing out excess inventory.
Specifically, we believe that while Intel's expectations for full inventory flush by the end of the second quarter seem somewhat optimistic, we expect the inventory to revert back to normal by early third quarter as the launch of Intel's new desktop processor (Conroe) hits the market.
Intel's aggressive pricing actions, however, continue to hurt AMD, especially in light of the (aforementioned) slight discount now being offered on several comparable Intel products. In fact, our checks in distribution suggest that sales in the month of May were thus far the lowest (on a monthly basis) this year, with June thus far offering little reason for optimism.
Overall, distribution sales in the Asian channel seem to be tracking 20% gains below quarterly plan -- a view corroborated by a large motherboard vendor, which confirmed that AMD's sales are tracking 15% to 20% below plan.
Further, our conversations with a large AMD chipset supplier suggest that sales for AMD chipsets in the second quarter are tracking to a roughly 15% sequential decline. Finally, with Intel set to pursue an aggressive stance, even as it introduces its new Conroe parts (July 23rd) at parity with current pricing on its performance parts, we see little respite on the pricing front for AMD.
Conversations with several server players (including Tyan, Inventec and other channel contacts), corroborate our view that Intel has made significant improvements in its next generation server solution (Woodcrest).
Customers were unequivocal in their belief that Intel's solution is now on par with AMD's Opteron in the power-consumption race, with opinion somewhat split on which was the better performing part. Overall, the tone was suggestive of the fact that Intel will reverse at least some of the recent market-share loss. |
