Intel Shares Look Stuck for a While

Shares of technology bellwether Intel ( INTC) touched a five-year low on Monday, and investors could be in for quite a wait before they see a significant move off that level.

The news was no better on Tuesday, as Intel sank another 91 cents to close at $16.02.

"With consumer confidence zero now, all the estimates are being cut," says Thomas Weisel analyst Kevin Cassidy, adding that he doesn't expect an Intel rebound anytime soon. "I have 5.7% growth for next year, but I am reviewing that."

"The global slowdown is finally hitting the PC market," explained JPMorgan analyst Christopher Danely, in a Monday note. "Our checks across the PC food chain indicate that demand is finally deteriorating due to the global economic slowdown."

Danely also cited weakness in the Taiwanese notebook and motherboard markets, as well as recent comments from Dell ( DELL) and Ingram Micro ( IM) highlighting a slowdown in PC demand. Another factor is the move to low-end notebooks, he added.

"We believe the shift to low-end notebooks that caused Intel to miss its 2Q08 gross margin guidance is occurring again during 3Q08," he wrote. "Our checks in both the retail (Best Buy, Circuit City) and Original Design Manufacturer (Compal, Quanta) channel indicate margin pressure continues in notebooks as a result of a shift to the low end."

The analyst lowered his 2008 EPS estimate for Intel from $1.29 to $1.27 but kept his revenue estimate of $40.5 billion. JP Morgan also lowered its 2009 revenue and EPS estimates from $43.2 billion and $1.40 to $42.3 billion and $1.30.

Thomas Weisel's Cassidy agrees that Intel's outlook is less than rosy.

"Until this market settles down, I don't think that there's going to be a rebound," he says, explaining that Intel is even feeling the pinch in some of its most lucrative foreign markets. "This year they held up because or Brazil, Russia, India, and China, but it seems that consumer spending even in those countries is coming down."

More than 70% of the chip vendor's revenue currently comes from outside the U.S., he adds.

Intel, however, is not the only chip company feeling the squeeze at the moment. In a note to investors Monday, Citigroup chip analyst Craig Ellis cited "snowballing signs of softness" and wrote that chip orders are "freezing up."

Ellis downgraded Fairchild Semiconductor ( FCS) and RF Micro Devices ( RFMD) to sell ratings, and lowered Intersil ( ISIL)from a buy rating to a hold.

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