Can New Intel Chips Deliver Gains to Stock?
Intel (NASDAQ:INTC), which primarily competes with AMD (NYSE:AMD), recently reported its quarterly earnings. The company continues to see high growth in its processor segments despite recent softness in the PC market. The upcoming launch of new Intel processors based on the Sandy Bridge architecture may help Intel gain share against rival AMD. Sandy Bridge architecture can benefit Intel’s PC (desktop and notebooks) processor businesses as well as its server processor business.
We’ve updated our price estimate for Intel’s stock slightly from $24.71 to $26.50.
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Sandy Bridge Ships in Q4 2010
Intel is expected to begin shipping its next generation microprocessor family codenamed Sandy Bridge in Q4 of 2010. The company showcased some design features for this product family at the Intel Developer Forum last month. This included extended chip performance and battery life along with several in-built visually related features. Intel stated in its recent earnings that Sandy Bridge represents largest increase in computing performance in company’s history and early demand is very high.
Intel’s customers are trimming down their inventories in anticipation of pushing out products based on new Sandy Bridge processor family. Intel plans to ship these new chips for PCs (notebooks and desktops) first and extend the architecture later to servers as well.
Notebook and Desktop PC Businesses Benefit
The new Sandy Bridge processors can potentially lift Intel’s market share in notebook and desktop processors beginning as early as first quarter of 2011. We estimate that the notebook and desktop processor businesses account for about 45% and 11% of Intel’s value, respectively.
What if Intel’s market share in both notebooks and desktops were to rise to 90% with the help of Sandy Bridge, establishing dominance similar to Intel’s share in the server microprocessor market? This can further lift the Trefis price estimate for Intel’s stock by about 6%.
Server Processor Business Benefits
Server microprocessor revenues for Intel grew by 30% over Q3 of 2009 [1]. This was driven by demand for high-performance Westmere and Nehalem-EX processors [1]. Cloud computing is also driving demand for server microprocessors. The shipments for this segment in Q3 2010 grew by 200% over Q3 of 2009 [1]. Moreover, Xeon product family continues to drive growth in data center (storage) segment.
We expect Intel to maintain high server processor market share of close to 92% in the calendar year 2010. Although we expect AMD to fight back and regain some of its lost share in this segment in coming years, Intel’s introduction of server processors based on the Sandy Bridge architecture can potentially moderate AMD’s assault. We estimate that Intel’s server processor business constitutes 24% of Intel’s value and that changes in the company’s server processor share can have a significant impact on Intel’s stock.
You can see the complete $26.50 Trefis price estimate for Intel’s stock here.
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