Fears of a slowdown in the PC sector,
already fanned by component-maker
warning this morning that its fiscal first-quarter results would come in below estimates, were getting some extra fuel today after
Banc of America Securities
semiconductor analyst Richard Whittington downgraded
to market perform from strong buy. (Banc of America hasn't done any underwriting for either company.)
Intel, according to Whittington, has not come through with what many expected would be higher chip sales in the second half. "Whether owing to 'slower demand' or 'low manufacturing yields," he wrote, "stories abound throughout Silicon Valley that Intel is coming up short as
the third quarter's conclusion draws near."
Intel was lately down $3.75, or 5.8%, to $61.13. AMD was off $2.25, or 7.4%, to $28.25.
In Intel's case, Whittington suspects that there is a problem on both the supply and demand sides of the equation. He notes that reports of insufficient deliveries to first-tier boxmakers, and that second-tier players "clearly are not seeing the allocations they'd anticipated," while SCI's warning makes him think that demand is slowing.
Whittington also lowered his earnings estimates for Intel. In the third quarter, he expects Intel to report earnings of 38 cents per share versus his previous estimate of 39 cents. For the full year, he lowered his estimate to $1.66 versus $1.68 per share. He also lowered his 2001 estimate to $1.80 from $1.85 per share.
First Call/Thomson Financial
, the 28 analysts who cover Intel expect the company to earn 41 cents in the third quarter of this year and $1.72 for all of 2000.
AMD is in trouble because, consistent with the SCI warning, it appears that the PC slowdown is centered on low-end boxmakers -- a big part of AMD's customer base.
"It fits with the data we've seen so far," says Jeff Matthews, president of Connecticut-based hedge-fund
. "It hasn't felt that great out there. SCI talked about a pretty sudden slowdown in their PC business this quarter -- they didn't see the usual big pickup in September that they expected." Matthews is short Intel.
Whittington lowered his earnings estimate for AMD to 63 cents from 65 cents and for the full year to $2.59 from $2.69 a share. For 2001, he lowered his estimate to $2.75 from $3.25 a share.
According to First Call, the 15 analysts who cover AMD expect the company to earn 63 cents in the third quarter of this year and $2.59 for all of 2000.