Intel Corp (INTC)

[wbmw]

I don't see how margins can drop to 55% next year. Intel's Core processor line isn't going to drastically drop in pricing, because the PC market is generally protected from tablets encroaching. Meanwhile, if Intel is crazy successful with tablets and starts selling 10s of millions of $25 chips, then that should be accretive to PC revenue, and raise the top line, even as it lowers blended gross margins.

Either way, this analysis doesn't make sense unless PCs start tanking in a big way, and the margin erosion comes from empty fabs. But that would require a >10% drop in utilization, which isn't going to happen. The worst case sky-is-falling projections have PCs falling much less than that, and any small shift in utilization can be consumed by adjusting the mix of wafer starts to larger die products, and then sell those through based on discounts (which would still yield more revenue per wafer than not shipping the wafer).