In two separate reports financial analysts from FBR Capital Markets have forecasted Intel Corp in Q2 could regain the market share it lost to rival AMD Inc in Q1 as CPU price becomes less of an issue and the economic situation begins to show signs of stabilization.

FBR did so while reporting on the two chip-making competitors, as well as the Q2 PC build forecast, which the market watcher said is expected to be flat quarter over quarter.

"Recent checks with the top five notebook ODMs and top four desktop motherboard makers are modestly weaker than our month-ago checks," Craig Berger and Robert Pikover, FBR analysts, wrote in the reports.

According to FBR, its contacts now expect Q2 notebook builds will grow 10% quarter over quarter, versus expectations for 11% quarter-over-quarter growth issued last month and expectations for 14% quarter-over-quarter growth issued two months ago. FBR also noted that its contacts now expect Q2 desktop shipments to decline 12% quarter over quarter, versus expectations for a 10% quarter-over-quarter decline issued last month and expectations for a 2% quarter-over-quarter decline issued two months ago.

"Overall, we now forecast Q2 PC builds to be flattish QOQ [quarter over quarter] (versus +1% QOQ last month and versus a somewhat eyebrow raising +7% QOQ two months ago)," the analysts wrote. "This second negative build revision (following three positive revisions from mid-February to mid-April) is due to continuing weak demand in Europe, transitional issues with Intel's ramping CULV notebook CPUs, and some component shortages for LED backlights, LCD panels, optical disk drives, and Ethernet chips. Component shortages could potentially worsen given seasonal strength in [the second half], which might cause some hording and double-ordering activity."

FBR said that it expects Intel to regain a couple of points of share in Q2 after losing share to AMD in Q1, "as CPU price sensitivity should play a lesser role now given broader signs of economic stability.

"Thus, with overall PC builds tracking flattish on a unit basis, some buffer CPU inventory likely being built in Q2, and with a couple of points of market share recovery, we think Intel's Q2 revenues are tracking up a couple of points sequentially," the analysts wrote in their report on Intel.

FBR further estimated that Intel's Q3 revenue will grow 4 to 8% sequentially to a range of $7.5 billion to $8.1 billion, slightly ahead of Street estimates of $7.7 billion.

FBR also noted that it believes opportunities for Intel brought about through its Atom family are growing, but pricing remains a concern. "We believe the Atom is opening up a lot of opportunities for Intel in the netbook, smartbook, embedded, and handheld space," Berger and Pikover wrote in the Intel report. "That said, we remain concerned that cannibalization, from notebook to netbook, from desktop to nettop, and from much higher CPU price points will mostly or fully offset Intel's other Atom-driven benefits."

FBR said that in the netbook and nettop space, it believes systems will be split between Intel Architecture (IA) chips and ARM-based chips. "While Intel has some strong unit opportunities, cannibalization concerns are paramount, particularly as Nvidia's Ion chipset or other better performing co-processors could make Atom-based machines good enough for the masses. Further ARM-based solutions from Qualcomm, Nvidia, Freescale, TI, Marvell, or others could provide meaningful competition with days of battery life versus Intel's hours of battery life. In the handheld, smartbook, and smartphone space, which we consider to be one space, we think the cellular operators will be a primary customer and will offer a subsidy model going forward. We do not think Intel has any particular advantages here versus the aforementioned competitors," the analysts said.

Specific to AMD, FBR said its recent channel checks suggest the company's Q2 revenues are likely tracking in line with the consensus revenue estimate of $1.12 billion, but not likely much better. Looking to Q3, FBR said it thinks AMD will guide revenues seasonally higher, or up roughly 5 to 10% sequentially, to around $1.2 billion, also in line with consensus.

"First, Q2 production starts are forecast to grow 60% QOQ across its foundry network (not Global Foundries), unchanged from prior month expectations," Berger and Pikover wrote in their AMD report. "We believe Q3 production starts are set to fall 10% sequentially, slightly worse than our month-ago checks of [down] 8% sequentially. We note Q3 starts could still be subject to revision and also account for a wafer build-ahead in Q2."

Second, FBR pointed to its expectations for sequentially flat Q2 PC builds. "While some AMD investors may argue that business is recovering, or that there is value in AMD being the world's only other processor company in an environment of increasing antitrust scrutiny, we remain cautious on shares of AMD," the analysts wrote, making note of the company's continuing cash burn.

"Also, we think some of AMD's better-than-expected Q1 revenues were a result of aggressive pricing actions, potentially impeding some of the firm's gross margin recovery. Finally, AMD may cede a couple of points of market share gained in Q1 as customer price sensitivity decreases, given broader signs of global economic stabilization," Berger and Pikover wrote.

By: DocMemory
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