Popularity of Netbooks Fades But Intel’s Stock Could Still Benefit
In its recent earnings, Intel (NASDAQ:INTC) reported a 19% quarterly decline in its Atom netbook processor revenues compared to the prior quarter (Q4, 2009). Meanwhile, Intel’s new generation of notebook processor chips (Core i3, i5 and i7) saw very strong demand among customers leading to higher than expected overall quarterly revenues.
This suggests that netbooks, which became popular during the recession, are losing their shine now. For Intel, this trend translates into a direct hit to sales of future Atom processors which are found in the majority of netbooks sold. However, Intel’s profits and stock can still benefit from the pick-up in notebook demand and the higher prices associated with notebook processors compared to netbook processors.
Below we discuss the importance of notebook and netbook chips to Intel’s stock and how our updated forecast for Intel notebook chip pricing impacts Intel’s stock.
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Notebook and Netbook Processors Most Important Business for Intel’s stock
Intel dominates the laptop processors market where it primarily competes with AMD (NYSE:AMD). We estimate notebook and netbook processors to constitute 46% of the recently updated $23 Trefis price estimate for Intel’s stock. In comparison, we estimate that laptop processors constitute about 20% of the $8 Trefis price estimate for AMD’s stock.
As consumer preferences shift from netbooks to more capable notebooks, Intel’s processor mix will shift towards the higher priced Core series processors used in notebooks, resulting in higher average selling prices that can boost Intel’s profits and the company’s stock.
Higher Laptop Processor Prices Expected
Expecting greater demand for notebooks, we have increased the 2010 Trefis forecast for Intel notebook processor pricing slightly from $99 to $101. This improved outlook for average notebook processor selling prices has led in part to the increase in the Trefis price estimate for Intel’s stock from $22 previously to $23.
You can modify the forecast below to see the dependence of Intel’s stock price on laptop processor average selling prices.
For additional forecasts and analysis, here is our complete model for Intel’s stock and AMD’s stock.