Analysts lash out at Intel CEO

Paul Otellini, Intel CEO, claims that Intel lost market share not because of AMD's superiority, but because of Intel's chipset shortages.

Needham's Charlie Glavin doesn't buy this cheap excuse:

"Baloney. I was hearing from the guys who will be buying the chips for the (computer) boxes. They said on a performance basis that AMD's products are better".

Prudential's Mark Lupacis shares a similar view. In a research report, Lupacis dismisses most of Intel's stated goals as wishful thinking. Specifically, Lupacis considers Intel's expectation to grow revenue by 18% in 2H06 "unrealistic", and Intel's gross margin will be negatively impacted by additional costs and larger die sizes. Moreover, Lupacis has discredited Intel's notion that it lost market share only because of chipset shortage.

Lupacis points out that history can't be used as guide, he reckons:

"AMD is clearly a different animal than it was 5 or 10 years ago. The company is no longer limited by capacity and only focused on supplying the low-end of the desktop market. AMD's portfolio is broad, arguably superior in the server and desktop markets, and for the first time ever,competitive in the notebook area.

...For years, the MPU was the gating factor in PC performance, and Intel’s manufacturing muscle focused solely on the MPU led to its market dominance.Today, it is not just the MPU, but how efficiently it interacts with peripheral chips like DRAM. As a result, we think that the market has shifted from a manufacturing driven one to an innovation driven one.Considering that AMD was the first with 64-bit memory addressing in the desktop, the first with a true dual-core product, and the first with an integrated memory controller hub, it appears that AMD is beating Intel to the innovation punch. Intel’s massive manufacturing muscle, on which it leaned so heavily in the past, is not as big of a differentiator anymore.
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By early‘07, we expect AMD will have a true quad core solution for both the desktop and server markets, which will look a lot better than Intel's solutions, two dual core chips glued together in a single package. In addition, we expect AMD's lower-cost Turion notebook MPU to continue to gain share for the next several quarters and anticipate a new mobile architecture from AMD in mid-07 that will test Intel's dominance at the high end of the notebook market."

Lupacis expects INTEL to continue losing market share to AMD, leading to a duopoly where AMD controls 30-40% market share. Lupacis rates INTC at underweight with a target price of $15, based on projected 2007 EPS of $0.96.