Intel Updates: Market Share Gains Evident in Results

Intel’s (NASDAQ:INTC) stock was relatively quiet in the week or so see sawing in a 5% band. Nevertheless there were interesting developments on competitive front involving its arch rival AMD (NYSE:AMD) and ARM Holdings. According to a recently released report from research firm IDC, Intel gained market share over AMD in Q3 2011 compared to Q2. This was also quite evident from the recent quarterly results for Intel and the fact that AMD has been having supply issues (see our article Intel Defies PC Market Trends, Revising Estimate to $29). On a the flip side, BMO Capital has reduced its rating for Intel from outperform to market perform, citing possibility of competition from ARM-based server chips. ^[1] Nvidia (NASDAQ:NVDA) is one of the companies that plans to enter this market somewhere around 2013.

We think that investors should not be too concerned about this potential development. There are likely to be several hurdles for ARM-based chip producers such as high performance required for servers, establishing reliability as suppliers and being application compatible. It will not be easy and for now, we can assume safely that Intel is likely to reign supreme in this segment.

Intel is also reportedly looking to partner with Toyota for a joint research project on in vehicle entertainment. While interesting, we dont see this as a meaningful driver in the near term.

Our price estimate for Intel stands at $29, implying a premium of about 35% to the market price.

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1. Intel Cut To Hold At BMO, ARM A Buy On Server Push, Barron’s, Nov 2 2011 [↩]