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Intel and AMD report 3Q 2007 Results – Second Half Rebound for PCs

Last week Intel and AMD announced their 3Q 2007 financials. Both companies made strong gains driven by increase in PC sales, mainly notebooks.

Intel surpassed its projections for the quarter, hitting $10.1 B in total sales, up sequentially 16% and 15% yr-to-yr. Additionally its gross margin improved to 52.4% compared to 46.9% in 2Q 2007. The company reported record MPU unit shipments along with flat ASPs. The PC chipsets also hit record unit levels, while motherboard units were down.

Intel’s 4Q 2007 Outlook indicates continued strong recovery for the PC market. The company is projecting total sales between $10.5 and $11.1 B with gross margins around 57%. Intel has been shipping quad core MPUs (actually a pair of dual core die in one package) and will be ramping up production of its next generation 45nm MPU for desktop and servers.

AMD also reported a sequential 18% increase in total sales for 3Q 2007, $1.6B, and 23% yr-to-yr. The company’s Computing Solutions segment grew 17% sequentially. This was due to a 19% increase in MPU revenue, driven by MPU unit shipment growth of 16%. Within this the Mobile MPU unit shipments grew 41% sequentially and 68% yr-to yr. AMD introduced its native quad core Opteron (65nm) and continues to ramp up its 65nm –production.

Semico Spin

Early 2007 there was concern about the semiconductor market in general and the PC market in particular. MPU ASP declined sharply due to intense competition between Intel and AMD. Intel won back the market share it lost to AMD in 2006. The latest results indicate that the PC market is healthy. AMD has bounced back from a dismal 1Q 2007 and is starting to regain some market share.

Semico had been forecasting a strong 2H 2007. In the MPU market, we had projected that MPU ASPs would bottom out in mid-2007 and start to level off and creep up. A richer product mix, mobile and server, would contribute to this. Also, Intel has set a goal to improve its gross margin.

Semico foresees MPU sales will reach $34.1B in 2007, a growth of 3.0%. This sets the stage for a stronger 2008 which is expected to grow 11.3% on sales. The new products from Intel and AMD, as well as a growing acceptance of Microsoft’s Vista will drive a new PC upgrade cycle.

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