Ahead of the Bell: Intel, AMD

Analysts see weakening PC market weighing on Intel, AMD

Demand for notebook computers weakened significantly in recent weeks, likely weighing on Intel Corp. and its smaller rival, Advanced Micro Devices Inc.

The two chip makers are responsible for making the bulk of the world's microprocessors. Intel's processors are used in about 80 percent of the world's PCs and servers built with PCs. And research firm IDC earlier this month put AMD's processor market share at 18.5 percent.

Friedman, Billings, Ramsey analyst Craig Berger cut his 2009 earnings estimates for AMD and Intel because of weakening PC demand. The analyst, who rates both Intel and AMD "Market Perform," said after checking with key manufacturers it looks like fourth-quarter PC demand is significantly weaker than it was a month ago.

"Overall, we forecast 4Q PC shipments to decline around 5 percent sequentially, below our month-ago forecast of 3 percent growth," the analyst wrote in a note to investors.

Berger thinks Intel's fourth-quarter revenue guidance of a 1 percent decline to a 7 percent increase "is at risk" and the company will likely provide a lower revenue guidance on its planned Dec. 4 mid-quarter update. He does not think Intel's shares will trade materially lower on the news. The stock closed Monday at $14.35, not far from its 52-week low of $13.37.

AMD plans to host its annual analyst day on Thursday. Berger cut his estimates for AMD citing the weakening PC demand. He expects a 2009 loss of $1.05 per share, down from a loss of $1.02. He cut his target price to $4.50 from $5.

For Intel, he expects full-year 2009 earnings of $1.10 per share, down from $1.33. Berger also cut his target price to $19 from $22.

ThinkPanmure analyst Vijay Rakesh noted a "significant weakening" in November of corporate demand for notebook computers.