yet another bit about supposedly "confirmed" upcoming Dell's AMD notebooks
Raising 3Q Notebook Build Forecasts Motherboard Continue In Li
2006-08-04 03:49 (New York)
Gurinder Kalra, 415-772-3217 gkalra@bear.com
Danny Kuo, 415-772-3215 dkuo@bear.com
AUGUST 4,
2006
Subject: Industry Overview
INDUSTRY: Semiconductors RATED: Market
Weight
BEAR, STEARNS & CO. INC.
EQUITY RESEARCH
Raising 3Q Notebook Build Forecasts, Motherboard Continue In Line with
Seasonal Trends
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Key Points
Our latest round of checks in the PC supply chain indicates that desktop
builds grew in line with our expectations, while notebook builds were ahead of
our expectations for July. We attribute the higher than expected notebook
builds to lower processor pricing, new model introduction, & improved customer
outlook.
For notebooks, our checks indicate that HP & Dell raised their demand
forecasts for new models slated for introduction in 2H06. We believe that
notebook inventory at the major OEMs have returned to healthy levels, which
supports our expectation of increased builds for August & September. We are
raising our 3Q notebook unit build forecast from +16% QoQ to +22% QoQ & would
note that our revised forecast is slightly above the past three year average
growth of 20%.
In regards to the market speculation (WSJ, 7/26/06) of Dell introducing
AMD-based notebooks, we have confirmed with a major ODM that Dell will start
shipping at least two AMD-based notebooks in 4Q06. These notebooks are
targeted at the mid to low-cost consumer segment. Our industry contact stated
that processor cost was the primary reason in Dell's decision to incorporate
AMD in its notebook product offering.
On the desktop side, our checks indicate that builds are expected to increase
in August and September, in line with our earlier expectations. We continue to
forecast desktop unit builds to increase 19% QoQ, in line with normal seasonal
patterns.
We maintain our constructive view on PC related semi stocks including INTC,
AMD and NVDA, and believe that the improving 3Q outlook from a build
perspective, if accompanied by improving end demand should serve as a positive
catalyst for these stocks. Channel inventory appears to be healthy, and
depending on PC sell through, we could see modest upside to our 3Q estimates
for these PC related semi companies. But we would also point out that
microprocessor pricing remains fiercely competitive and should continue to
pressure margins for Intel and AMD in 3Q.
Rating and Price Target Revisions (All values are in USD)
Company Rating Price Target
To From Year To From
Company
+ All numbers are after stock based compensation expense. Beginning with 2006
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policy. Prior years are not necessarily normalized. Outside data provider may
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Key: WSJ = Wall Street Journal
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Gurinder Kalra
***Companies Analyzed***
* Intel Corporation (INTC) - $ 17.59 (as of August 01,2006 16:00 ET) -
Outperform
Price Target ('06) : $ 24.00
Risk(s) to Price Target- Weakness in the PC and communications end markets;
execution risks associated with new product introductions; competitive and
pricing pressure from AMD; overcapacity in the microprocessor industry;
inventory risks.
Valuation Methodology- Our 2006 year-end price target is based on a P/E
multiple of 19x applied to our 2007 pre-options EPS estimate.
* Advanced Micro Devices, Inc. (AMD) - $ 19.60 (as of August 01,2006 16:00
ET) - Peer Perform
* Nvidia Corp (NVDA) - $ 22.88 (as of August 01,2006 16:00 ET) - Peer Perform
* Hewlett-Packard Co. (HPQ) - $ 31.67 (as of August 01,2006 16:00 ET) -
Outperform
Price Target ('06) : $ 47.00
Risk(s) to Price Target- IT/macro-economic environment, company execution on
restructuring initiatives, competition in multiple product categories
(especially with Dell in printers and PCs), impact of component pricing
Valuation Methodology- Applying an 18x P/E multiple (at higher end of H-P's
historic range) on our CY07 post-option EPS estimate of $2.63 yields our
year-end 2006 price target of $47
* Dell Inc. (DELL) - $ 21.65 (as of August 01,2006 16:00 ET) - Peer Perform
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Outperform (O) - Stock is projected to outperform analyst's industry coverage
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Gurinder Kalra,Semiconductors
Securities covered by the author(s) of this report include:
Samsung Electronics,Altera,Advanced Micro Devices, Inc.,ATI Technologies
Inc.,Intel Corporation,Lattice Semiconductor,Micron Technology,Nvidia
Corp,SANDISK CORP,Texas Instruments,Xilinx
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