Intel Rises on Analysts’ Sliver of Light in PC Tunnel
It’s a rare instance of light at the end of the tunnel for the PC industry, generally — though it was hard to tell from the shares of Hewlett-Packard, which fell by more than two percent today, and Dell, whose shares fell slightly but which are artificially buoyed by the price offered in a management buyout offer.
Analyst Gus Richard of Piper Jaffray argued in a note to clients today that once Microsoft drops support for Windows XP in April of 2014, that will open the door for lots of corporate customers to upgrade their notebooks. If you guess that about 30 percent of existing corporate notebooks are running XP and more will likely need to be upgraded for other reasons, that works out to an upgrade of between 150 million and 250 million machines, he said, and that’s good news for Intel.
Even so, he expects the market for traditional PCs to continue to do what it has been doing all this year and most of last year: Decline. Richard expects a global drop in PC sales of about 12 percent in 2013, twice as bad as he had previously forecast. But he expects a modest increase of about five percent in 2014. “While not as potent as upgrade cycles of the past, we think it will give a bump to PC sales next year,” he wrote. Intel made a similar argument in a study it published last week.
Additional good news for Intel, Richard said, may be a firming up of average selling prices on individual chips, as the mix of chips sold tends to favor more powerful units aimed at corporate machines and fewer aimed at consumers.
On top of that, he thinks Intel will finally boost its share of chips sold into tablets from “negligible” to as much as 10 percent or 15 percent. That alone will amount to as many as 36 million chips and as much as $1.1 billion in incremental revenue. This prompted a bump in his target price on Intel to $22 from $20 a share. It closed today above that at $22.28, up more than 1.5 percent.