Intel Corporation (INTC) Took Share From AMD, But Margin Risks Remain

Intel Corporation (INTC) Took Share From AMD, But Margin Risks Remain
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Intel Corporation (NASDAQ:INTC) appears to have gained market share from Advanced Micro Devices, Inc. (NYSE:AMD) during the third quarter, but Goldman Sachs analysts remain concerned about the company’s gross margins. As a result, they remain Sell-rated on Intel.

Intel Corporation (INTC) Took Share From AMD, But Margin Risks Remain

Research suggests Intel stealing from AMD

Analysts James Covello, Mark Delaney, Jack Sheng and Chelsea Jurman examined data from Mercury Research and concluded that Intel Corporation (NASDAQ:INTC) has taken both market share and revenue share from AMD. They report that the company appears to have taken about 50 basis points of revenue and 72 basis points of unit share from AMD.

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Intel Corporation (NASDAQ:INTC)’s unit share in servers rose to almost 97% from 95% previously, while its revenue share rose to about 98% from 97%. In mobile, its unit share rose to almost 86% from 84%, while its revenue share climbed about 100 basis points to about 94%.

The analysts report that Advanced Micro Devices, Inc. (NYSE:AMD) did appear to have gained about 100 basis points in desktops, increasing its share to about 19%. However, its revenue share in that segment remained almost flat at around 10%. They believe Intel will keep taking share from AMD in the PC segment’s performance-driven areas because they think Intel’s integrated design and manufacturing approach provides it an advantage in processor power.

Intel’s pricing “relatively benign”

The Goldman Sachs analysts call Intel Corporation (NASDAQ:INTC)’s pricing during the third quarter “relatively benign.” They report that overall PC client MPU average selling price rose 1% sequentially, while Intel’s notebook average price rose 1.5% quarter over quarter and desktop rose 2%. In servers, its average selling price rose 2% sequentially.

The analysts believe that Intel’s relative strength in PC clients is because tablets are cannibalizing PCs, especially where processor average selling prices are lower. They also noted that Intel’s third quarter report indicating flat average selling price in PC Client Platform did include chip sets. They think high wafer loadings from Intel and a shrinking PC market may create MPU supply, resulting in longer-term pressure on average selling prices

Goldman says sell Intel

They think Wall Street earnings per share estimates are at risk because of lower utilization and the resulting lower gross margins. They think Intel Corporation (NASDAQ:INTC)’s guidance assumes high wafer loadings will continue. They also note that Intel has acknowledged that it has been building inventory within its supply chain.

The analysts believe the company should reset earnings expectations because they think its shares will keep underperforming as long as estimates continue to be revised downward.

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