Intel Sets Sights on Ultrabook Adoption

-7.61%
Downside
44.52
Market
41.13
Trefis
INTC: Intel logo
INTC
Intel

Intel (NASDAQ:INTC) is giving ultrabooks a serious push in 2012. Ultrabooks are extra thin notebooks with sleek design and good battery performance. The company expect this new design to sustain the growth in notebook market. However the downside is that ultrabooks are expensive and therefore the adoption might be slow and primarily limited to developed economies. Intel expects that by end of 2012, 40% of all notebooks shipped will be ultrabooks. Can Intel achieve this target? If it does, what could be the impact? Below we take a quick look at this. Intel competes primarily with AMD (NYSE:AMD) in PC & server microprocessor market.

See our complete analysis for Intel

To achieve its 40% target, the prices of ultra-books may need to go lower and that can happen if the prices of individual components drop. A UBS analyst suggests that such a situation may be likely as prices of peripherals decline. [1]

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The price for Intel’s microprocessor for ultrabooks will range from $130 to $225. [1] This is a little expensive when compared to our estimated average Intel notebook processor pricing of a little over $120. If we assume that Intel achieves its target by end of 2012, and for 2013 its ultrabook related processors feed about 50% of the notebooks, it will imply an average processor pricing inflation of about 10%. This calculation assumes an average processor pricing of close to $150 for ultrabooks. In this scenario, the aforementioned price increase will lead to close to 5% upside to Intel’s stock.

Our price estimate for Intel stands at $30.52, implying a close to 15% premium to the market price.

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Notes:
  1. Intel: UBS Sees Promise in $700 Ultrabooks, Barron’s, Feb 27 2012 [] []