Intel hit as PC market slows

Intel is expected this week to report its worst quarter in years, with the world’s biggest chipmaker suffering from a slowdown in the personal computer market, an inventory build-up and loss of market share to its chief rival AMD.

Semiconductor analysts at Merrill Lynch have predicted the most disappointing set of results and forecasts since the technology bubble burst and have even questioned whether Paul Otellini is the right man to lead the company – less than a year after he became chief executive.

“We think that Intel is in need of an overhaul similar to what Lou Gerstner undertook at IBM following that company’s crisis,” said Joe Osha, Merrill Lynch analyst, in a research note this month. “We’re not yet convinced that Paul Otellini, a career Intel man, is the guy to do it.”

The note suggests there is “a disconcerting lack of urgency at Intel” and says it is unlikely to “ever return to the dominance it once enjoyed”.

Intel shares nearly all of the market for the “x86” processors at the heart of PCs with AMD, but still enjoys more than 80 per cent of industry sales. However, AMD has been gaining.

Its share grew from 11.9 per cent to 15.3 per cent between the third and fourth quarters of 2005, and last week it reported further gains in the first quarter. Bank of America analysts said it appeared to have gained up to a further percentage point.

AMD has benefited from the superior performance of its chips. Intel has suffered from double-ordering by customers who have then cut back as PC demand has slowed. This has left it with a substantial inventory.

Intel is expected to fight back with chips based on its first new architecture in five years. The increased performance and energy-saving features of the Woodcrest and Conroe chips will make it more competitive in desktop PCs and servers.

First-quarter earnings of 23 cents a share and revenues of $8.93bn are expected on Wednesday, according to a poll of analysts by Thomson First Call. Second-quarter forecasts should be downbeat and Apjit Walia, semiconductor analyst at RBC Capital markets, sees nothing to spark a rally in Intel shares, which hit a 52-week low of $19.10 last week.

“People are saying maybe the worst is over, but the PC market is slowing down and AMD has reached a threshold that’s unprecedented so I’m not that optimistic – I think [the shares are] dead money,” he says.

Copyright The Financial Times Limited 2016. All rights reserved. You may share using our article tools. Please don't cut articles from FT.com and redistribute by email or post to the web.

More on this topic

Suggestions below based on Technology

Intel strives for new route to domination

Twenty years after Intel made a transition that changed the technology industry, the world’s biggest chipmaker is engaged in a soul-searching exercise it says could be of equal importance.

Intel sees PC market slowing

Intel on Thursday forecast slowing growth for the personal computer industry this year and reported that several million of its microprocessors had piled up with its customers over the past two quarters.

Intel profits drop by a third

Intel’s profits fell by a third in its first quarter, and gross margins are expected to drop below 50 per cent in its second, as the world’s biggest semiconductor maker struggles in the face of slowing PC growth.

Ebay data fail to dispel growth concerns

Ebay’s latest quarterly results on Wednesday failed to dispel concerns that growth in its core online auctions business is decelerating, leading to an 8 per cent fall in the internet company’s shares in morning trading in New York on Thursday.

Intel loses market share to AMD

Intel, the world’s largest chipmaker, on Friday disappointed the market for the second time in six weeks with its sales figures, blaming weaker demand for its processors and market share loss to AMD, its biggest rival.