Intel Corp's attempt to stanch the loss of market share to Advanced Micro Devices Inc, its smaller rival in the computer microprocessor business, appears to be working and may allow it to gain lost ground over the next six months, analysts said on Friday.
AMD on late Thursday warned second-quarter revenue would be about US$1.22 billion, or about 9 percent below the previous period. In April, the Sunnyvale-based company had forecast revenue that would be flat or slightly below first-quarter sales of US$1.33 billion. It pinned the lower estimate on declining sales of processors for desktop and notebook PCs.
The disclosure came as an abrupt reversal for AMD, which over the past year has picked up about 5 points of market share, mostly at the expense of Intel, according to Mercury Research. With AMD's share hovering around 21 percent, company executives last month said they were preparing to supply 30 percent of the market's needs by 2008.
Steep price cuts from Intel, the world's biggest chip maker, appear to be throwing a fork in those plans, analysts said. Over the past few months, Intel, head quartered in Santa Clara, has slashed prices for its PC processors by as much as 30 percent.
Intel, whose processors have been largely outgunned by higher-performing chips from AMD, also has been talking up future price cuts that are to coincide with the release of three new products, due by midsummer, it says will put the company back in the technological lead.
Intel's product and pricing forecasts caused people to delay buying computers over the quarter, some analysts said.
"In the years that we've been covering Intel we can't recall another time that the company has been so willing to talk about price cuts, simply because that tends to damage demand for the near term," Merrill Lynch analyst Joe Osha wrote in a report. "At this point, though, pushing demand as far out as possible has made sense for Intel given Intel's own problems and planned product launches for Q3."
Bank of America analyst Sumit Dhanda agreed that Intel's cuts hurt sales of AMD's PC processors, adding that in some cases the larger company's prices were lower than comparable products offered by AMD. AMD made cuts of its own, but they came later in the quarter. They also ranged from 8 percent to 10 percent -- smaller than Intel's reductions, he said.
"Intel has been a share gainer in the desktop and notebook segments throughout the June quarter, thanks to aggressive pricing incentives," Dhanda wrote. The cuts, "although not enough to mitigate the weak PC demand, helped stimulate demand for Intel parts vs. AMD's."
He predicted the pattern would continue as Intel introduces a desktop chip code-named Conroe later this month and a notebook processor code-named Merom next month.
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