In a note to investors dated Wednesday, analysts at Sterne Agee warn that PC makers may cut production 10% to 12% quarter-over-quarter in the period ending in March. The decline is larger than the 6% to 7% consensus estimate for Intel Corp. (NASDAQ: INTC) shipments in the quarter. The year-over-year trend indicates a decline of 10% or more in the March quarter.

The investment firm has a Neutral rating on Intel stock with a price target of $20 a share. The stock closed at $25.95 on Tuesday after posting a new 52-week high of $26.04. To say that Sterne Agee is cool on Intel shares is probably an understatement.

Corporate PC sales were slightly higher in the just completed December quarter, up 25,000 to 100,000 units, but consumer sales were flat with expectations. January’s build rates for PCs and notebook computers are sharply down, and the belief that sales trends may stabilize in the first half of 2014 is no longer valid. By the second half of this new year, the down trend may stabilize at a loss of 3% to 7% year-over-year, but the more than 10% declines expected in the first quarter could continue throughout the first half of the year.

Intel’s weakness in the smartphone market is not being offset by sales of PCs and notebooks, and the company’s focus on tablet devices will help. Weaker notebook sales “could be a drag offsetting the incremental table upside.” Intel noted in its investor day presentation that it expects tablet volume of 40 million units in 2014, but that those sales will cost the company 150 basis points of gross margin.

Sterne Agee maintained its rating and price target at 10.7 times the firm’s current 2014 EPS estimate. The consensus price target on the stock is $24.50, yielding a forward multiple of 13.7.

In premarket trading Thursday, Intel shares were up fractionally at $25.96.

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