A weak sales in PC industry has brought chipmaker's shares to traded low on Monday. Analysts have lowered the estimates on two leading chip manufacturers, Intel and AMD.
Analysts have concern that the companies will unable to meet expectations amidst the continuing under performance in laptop and PC market. Bernstein on Monday downgraded stock of Intel Corp. (INTC) to underperform from market perform, while Deutsche Bank lowered its first quarter price target estimation on Intel's to $37.
Meanwhile UBS corrected its buy rating on Intel to $36, and reiterated its sell rating estimates on Advanced Micro Devices Inc. (AMD), citing lack of conviction that AMD can return to profitability and positive cash flow after weak PC trends.
Analyst at Bernstein Stacy Rasgon wrote in her note to client regarding a possibility of weak performance in the first quarter for Intel. As Market Watch quoted, she warned that even though Intel did not isse profit warning but she was assured that estimates on second and third quarter are still too high. She assumed that Intel will reset its full-year estimates in updated guidance next April.
"Over the last few weeks there has been much debate as to whether deteriorating industry datapoints might suggest an Intel preannouncement was in the cards. As of this writing the answer appears to be 'no.' However, we do not believe this means the company is necessarily out of the woods," Stacy said in her report.
Intel and AMD has looked forward to diversify their business. Especially after IDC reported the largest decline of PC shipments in history by 10.6% in 2015. Both Intel and AMD are looking into areas such as virtual reality, wearables and smartphones.
AMD chose to step into virtual reality area. The chipmaker showcased its virtual reality chips in Games Developer Conference (GDC) 2016 in San Fransisco last week. While earlier this month, Intel acquired Replay Technologies, the startup that develop 3D video reconstruction technologies.
PC World reported that both Intel and AMD have cooperated in video graphic area. Both companies have collaborated in creating external graphics cabinets Razer Core. The cabinet provides an external switch to laptop or low-powered desktop to have a high performance graphics device using Thunderbolt 3.0 port.
Currently, according to Tech Radar, Intel is under a $1.5 billion licensing agreement with NVIDIA, AMD's rival in graphic technology. The two companies signed agreement in 2011 which will expire on March 17 next year. There are rumors that Intel will turn to AMD for its Radeon graphics as the deal ends, thus protecting Intel from lawsuits.
As Intel and AMD were hurt by weak PC sales, the companies' shares were traded low on Monday. Both companies also seek to diversify its business including to work.
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