Intel Corp (INTC)

[VeeCee]

INTC: Merrill Cuts Estimates, Pounds Table on ‘Haswell,’ Process Lead
By Tiernan Ray

Merrill Lynch’s Vivek Arya today joins the chorus of those cutting expectations for Intel (INTC), trimming his Q3 and Q4 estimates, and lowering his 2013 EPS estimates, and lowering his price target to $30 from $34, while reiterating a Buy rating on the shares.

Citing some weakness in PC sales from his Asia “checks,” Arya cut his Q3 estimate to $13.9 billion in revenue and 54 cents EPS from a prior $14.3 billion and 60 cents. For the full year, he sees $54.66 billion and $2.20, down from $55.86 billion and $2.36 per share, and for 2013, he sees $56.86 billion and $2.30, down from $59.1 billion and $2.46.

However, Arya’s real focus in the report is less the bad than the good, in particular, the importance of Intel’s process technology lead, and he pounds the table for the stock:

Next-gen chip manufacturing has become a 3-horse race between Intel, TSMC and Samsung, with Intel holding a 1 to 4 year lead, in our view. As we saw in 1H12, foundries were unable to ramp 28nm capacity, leading to product delays. Rising costs/ complexity (tri-gate) could further widen this gap. We believe this could enable Intel to gain a foothold (vs. zero today) in mobile over the next 2 years, as smartphone/tablet vendors look to Intel as a second or even primary source […] We firmly believe in Intel’s ability to reliably produce the lowest cost and highest performance silicon can help it maintain a dominant position in servers/data centers (20% of sales, 10-15% CAGR), and transition from legacy PCs to next-gen smartphones, tablets, Ultrabooks and other converged devices in the next 1-2 years. Investors, meanwhile, benefit from a 3.6% div yield, $7.5bn in available buybacks (6% of mkt cap) and <10x PE.

With Intel hosting its “Intel Developer Forum” next week in Silicon Valley, Arya is particularly enchanted with what will be the unveiling of “Haswell,” a new processor architecture designed to lead to greater power savings at 22 nanometers:

Haswell will be the first processor to be designed from the ground up to fully optimize the power savings and performance benefits from the move to 3D or tri-gate transistors on the 22nm process node. Improved graphics performance. Haswell is expected to double the graphics performance vs. Ivy Bridge processors bringing its performance on par with the $50-$70 graphics cards.

Intel shares today are up 55 cents, or 2%, at $24.93.
http://blogs.barrons.com/techtraderdaily/2012/09/06/intc-merrill-cuts-estimates-pounds-table-on-haswell-process-lead/