Reuters: Technology News: Analysts see weak PC demand hurting Intel margins

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Analysts see weak PC demand hurting Intel margins Jul 18th 2012, 11:11 Wed Jul 18, 2012 7:11am EDT (Reuters) - Intel Corp (INTC.O) could face pressure on gross margins from the lack of demand for personal computers amid rising competition and a weakening global economy, warned Wall Street analysts after the company cut its 2012 revenue forecast. Analysts from at least four brokerages lowered their price targets on Intel after the world's leading chipmaker on Tuesday reported second-quarter revenue slightly below analysts' expectations. The company also cut its 2012 revenue growth view to between 3 and 5 percent from its prior view of "high single-digit growth." Analysts raised concerns about Intel's inventory levels rising about 9 percent sequentially for the second quarter. "While we can't rule out the risk that inventory build represents to gross margins, it is incumbent upon a weaker demand environment than Intel currently envisions; in other words, inventories themselves are not the problem -- demand is the primary concern," Citi Investment Research analysts said. Intel, which said a glut in its Ivy Bridge microarchitecture was the major reason for increased inventory, maintained its 2012 gross margin forecast of 64 percent. It also predicted "Ultrabooks" would comprise 40 percent of all laptops sold by the year-end. But analysts at Piper Jaffray believe the company's weaker outlook is also a result of "too expensive" Ultrabooks and consumers preferring smartphones and tablets to personal computers. "We expect lack of excitement in PC clients will drive a mix shift to lower price point notebooks and ultimately pressure gross margin and growth," Piper Jaffray analysts said. Shaky economies in Europe and the United States and a growing consumer preference for Apple Inc's (AAPL.O) iPad tablets have been taking a toll on the PC industry. Evercore Partners cut its price target on Intel stock to $26 from $27, while Canaccord Genuity lowered it to $26 from $28. Jefferies & Co reduced its target price on the stock to $29 from $30 and RBC Capital Markets slashed it to $30 from $33. According to Thomson Reuters StarMine, 13 analysts rate the stock "strong buy," 11 rate it a "buy," 25 a "hold," and five have a "sell," with a mean price target of $29.14. Shares of Intel, which competes with smaller rival Advanced Micro Devices (AMD.N), closed at $25.38 on Tuesday on the Nasdaq. The stock has lost nearly 10 percent since end-April. Intel shares were down 1 percent in Frankfurt trading by 1050 GMT (6.50 a.m EDT) on Wednesday. (Reporting by Fareha Khan in Bangalore; Editing by Tenzin Pema and Joyjeet Das) Link this Share this Digg this Email Reprints

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