Good News for Intel, AMD on Build Orders

Even with many of Intel's existing processors due to be upstaged by new desktop and laptop models next month and going into a traditionally slow time of year, it looks as if system builders are continuing to make new products and placing orders with chipmakers Intel and AMD.

FBR Capital Markets conducted its monthly check with major desktop and notebook PC manufacturers and once again adjusted its estimates to the upside compared to just one month ago. Overall, FBR projects fourth-quarter PC builds to decline just one percent from Q3 instead of last month's projection of two percent.

Not surprisingly, there is a big difference between platforms. Notebook builds are expected to be up 10 percent quarter-over-quarter (QoQ) while desktops are down 16 percent QoQ.

"Potential 2010 catalysts include some corporate refresh benefits from Windows 7 (consumer sell-through seems reasonably robust so far); additional netbook, nettop, and consumer ultra-low-voltage (CULV) units; and increased touch-panel applications," wrote analyst Craig Berger in a research note.

That's great news for all component makers, including Intel (NASDAQ: INTC) and AMD (NYSE: AMD). FBR figures Intel is likely tracking in line with the midpoint of Q4 guidance, with revenues growing six to eight percent sequentially and earnings per share (EPS) unchanged at $0.27.

As for AMD, it's looking at three to four percent growth due to being more of a desktop player than Intel. FBR also thinks AMD revenues could seasonally fall by four to eight percent sequentially in Q1 2010 to around $1.4 billion, generally in line with Street estimates.

It would seem counterintuitive that the market would be down one percent with Intel and AMD still showing growth, but Berger notes, "oftentimes Intel's CPUs are put into PCs at the last possible moment, so some PC builds in 3Q end up as Intel CPU shipments in 4Q."

That's why in Q3 Intel's CPU sales grew 15 percent sequentially but builds grew 25 percent: manufacturers used existing inventory. So an OEM/ODM's inventory can affect how many chips it buys and why the chipmakers won't necessarily grow or shrink in parity with the PC vendors.