June 10, 2011 / 1:59 PM / 8 years ago

AMD's new chips could force Intel to cut prices

(Reuters) - Advanced Micro Devices Inc could win a larger pie of the desktop PC market helped by its newly-launched Llano and Bulldozer chips, unless Intel Corp lowered its own prices, Macquarie Research said.

Stiff competition would force Intel to lower prices which “adds risk to our flattish average selling price assumption” for the second half of the year, analyst Shawn Webster said in a note to clients.

He cut his target price on Intel’s shares to $24.60 from $26.70, but said that Intel’s notebook share seemed secure despite AMD’s design wins.

“While we note evidence of increased notebook CPU design win activity for AMD, most companies we spoke to expected Intel’s notebook CPU market share to remain stable for the balance of 2011,” said Webster, keeping his “outperform” rating on Intel’s stock.

Intel, whose chips are the brains in 80 percent of the world’s PCs, had said it expects PC unit sales to rise in the “low-double digits” percent this year.

Webster said higher factory start-up costs and unit costs would see Intel’s gross margins in the second quarter to dip sequentially to 61 percent, which should be the lowest for 2011.

Intel’s shares closed at $21.76 Thursday on Nasdaq.

Reporting by Saqib Iqbal Ahmed; Editing by Savio D'Souza

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