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Intel Outlook On Track With Semico Forecast

Last week (August 28, 2009) Intel raised its revenue forecast for 3Q 2009.  The company stated that due to “stronger than expected demand” for microprocessors and chipsets it has raised is revenue forecast to $9.0 B, plus or minus $200 million.  The previous outlook given by Intel in July was between $8.1 and $8.9 billion.

Intel is one of several other high profile companies in high tech who have recently indicated seeing signs of a recovery.  Dell had lower profits than a year ago, but not as bad as had been expected.  Dell is anticipating improving sales in 2H 2009.  Hewlett-Packard has seen its profits slide also, but the company has said that business is stabilizing.

Semico Research has forecasted since early 2009 that the semiconductor industry would see a strong recovery starting in Q2 2009.  This has been reported in several of our publications, including the IPI Report.  Semico’s PC forecast and related MPU forecast has changed very little since early 2009.  The recent news, including Intel’s revised 3Q 2009 outlook, supports Semico’s views.

Intel’s MPU business usually represents about three-quarters of its total revenue stream.  Historically, Intel holds just over 80% of the MPU market, per the SIA/WSTS Blue Book.  Therefore, Intel’s revenue prediction is in line with Semico’s MPU forecast for 3Q 2009 of $8.2 billion.

The reduction in inventory beginning in late 2008 was a severe over reaction by many OEMs, among them PC manufacturers, who anticipated a sharp drop in demand by consumers.  This resulted in production pipelines running at very low capacity and IC sales fell dramatically in 1H 2009.  Those production pipelines need to be refilled.  Demand is returning.  Prices have been slashed to encourage sales.  Consumers have delayed purchases.  In the PC market, older systems will be replaced as Intel and AMD roll out new products with much improved performance.  Windows 7 is highly anticipated.  Some new PC sales will be spurred by Windows 7; not too many PC users relish upgrading PCs with a new OS.

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