AmTech’s Stake In the Ground on Intel (INTC, AMD)

Intel (NASDAQ: INTC) is being defended by American Technology Research ("AmTech") on recent weakness today.  This isn’t just a "reiterated Buy" rating (even if it is "reiterated Buy") as the direct thesis is "We Are Buyers of INTC, Here and Now."

The call is based on the belief that general CPU/PC demand and sell-thru were strong in Q4, although it notes an expectation that Q1 will deliver "at or below seasonal averages" for the industry but from a higher starting point than most expect.  AmTech also expects a beat vs. consensus as it expects about $300 million above consensus on the top-line and $0.01 above on the bottom-line.  AmTech is modeling INTC to continue gaining share which would offset a slower Q1. 

"We believe the Q/Q industry percentage decline in Q1 is a bit misleading we are working off of difficult compares with a strong Q4.  We acknowledge that Y/Y comps will become more difficult as we head into Q208.  Lastly, INTC’s gross margin is likely expanding as expected even as memory loss impacts results given the delay of NOR spin-out and NAND IMFT ramps." 

Conversely, AmTech is lowering estimates for Advanced Micro Devices (NYSE: AMD).  AmTech expects the red headed step child of the processor industry (a673b.bigscoots-temp.com’s opinion, not stated by AmTech) to post wider losses on lower revenues as it cut estimates for 2008 from $7.442B and a loss of $0.02 down to a new target of $7.192 Billion in revenues and a loss of -$0.50 EPS. AmTech believes the fix for the quad core processors will take longer than has been telegraphed and it will take longer to repair botched customer relationships.  It does at least note that the ATI graphics unit is the one bright spot that could help deliver upside.  However, AmTech is maintaining its Neutral rating.

We won’t rehash over and over on this, but it is still the belief of a673b.bigscoots-temp.com that unless Hector Ruiz has a magic feather in his cap that he’ll be out the door in a very short period of time.  We also think the sell-off in Intel shares has been overly punishing compared to reality, but we’d still make a reminder that the damage to the chart has been so severe that it is likely going to be some time before it can rectify the technical damage that has been done. 

Jon C. Ogg
January 8, 2008