Diesen said that Intel had stopped trying to make a profit on its current generation of PC processors and had initiated a price war with its rival Advanced Micro Devices Inc. (AMD). The average price of a PC processor in April was less than half what it was in March, Handelsbanken (Stockholm, Sweden) said.

“We expect another profit warning from Intel, guiding Q2 sales to $7.9 billion versus a consensus of $8.4 billion,” Diesen said in a note to clients. “After Intel stuffed the channels with chips in February and March, the floor fell out in April, and [PC processor] sales dropped 52 percent year-on-year,” he added.

Handelsbanken has predicted that Intel will have a poor 2006 as a result of a weak market for personal computers and price competition in flash memory, with total revenues at Intel declining 6 percent in 2006 to 32.4 billion from 34.4 billion in 2005.

AMD, which will also be hurt by poor PC sales, is expected to do better in percentage terms. Handelsbanken sees AMD just about holding its ground with sales moving from $3.4 billion in 2005 to $3.3 billion in 2006.

The collapse in the industry’s sales of PC processors in April occurred in all geographical areas except Japan. Compared with the same month a year before sales to the Americas fell 78 percent, sales to Europe dropped 51 percent and sales to Asia-Pacific, the biggest region, fell 50 percent. Sales to Japan rose 18 percent, Handelsbanken said. At the same time average selling prices fell from $109 in March to $52 in April, and were down 40 percent compared with April 2005.

“Intel has obviously given up on making any money on their current generation of processors and has started a price war with AMD,” concluded Diesen.

By: DocMemory
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