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Numerous financial analysts reduced their estimates for Advanced Micro Devices and Intel Corp. on Tuesday as they feared that the demand towards personal computers (PCs) will slowdown tangibly in Q4 and will continue to be weak next year as well, which will naturally affect financial performance of the two suppliers of central processing units.

According to analyst Tim Luke from Barclays Capital, total available market of microprocessors will grow by only 2% in 2009. Earlier the analyst predicted the 5% growth of the TAM, or even 6% growth, if Intel Atom processor for ultra low-cost personal computers (ULCPCs) is excluded from the consideration. Moreover, Mr. Luke predicted that the industry revenue will decline by 2% next year amid unit sales growth.

“The supply chain is telling us that there is strong concern for demand decline, probably into the low- to mid-single digits on a unit basis for total PC processor growth in the year 2009,” said Shane Rau, an analyst at IDC, in an interview with Cnet News.com web-site.

Mr. Luke and Mr. Rau are among many analysts who believe that hard times are ahead for the two suppliers of x86 central processing units. As a result, some reduce their estimates for earnings and profitability of AMD and Intel without downgrading their ratings, whereas the others downgrade their stocks too.

JMP’s Krisha Shanker, notes cautious data points on server and PC demand from notebook and motherboard companies, which will inevitably affect AMD and Intel, reports Barron’s Online. Friedman Billings Ramsey analyst Craig Berger, who cut numbers for both AMD and Intel, also indicated signs of weakness at both notebook and motherboard manufacturers in Taiwan.

According to analyst Vijay Rakesh from ThinkEquity, there has been “significant weakening in November of corporate notebook demand”, as a result Acer and Dell had already reduced their orders for new laptops. Several days ago Asustek Computer and Apple also cut their notebook outsourcing orders. This will primarily affect Intel, not AMD, but the overall situation has no chances of not affecting the smaller chipmaker.

Piper Jaffray’s Auguste Richard is also pessimistic about Intel, citing “weakness in the company’s channel business due to the strong dollar and the tight credit environment”. This also applies to AMD, which sells not only central processing units and chipsets, but also graphics processing units. The majority of expensive graphics cards are sold in the channel.

“PC OEMs are being very conservative with their build plans for Q4. [Because they] are worried about having too much inventories if end-market demand comes in materially weaker than expectations this holiday season,” an analyst with Avian Security told Cnet News.com.

Tags: , Intel, AMD, Business

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