Wednesday, 15 July 2009

Intel and Cold Tech

(By Richard Holway 7.00am 15th July 09) Intel shares soared by nearly 8% in after hours trading last night after they announced ‘better-than-expected’ results. PC manufacturers actually bought more chips than in the previous quarter; giving hope that the downturn had bottomed out. Q2 revenues grew 12% on Q1 but still fell 15% to $8.02b YoY. This was a lot better than the $7.28 analysts expected. AP reported Kevin Cassidy, a semiconductor analyst with Thomas Weisel Partners, saying "I'm in shock -- it's great news. It's just amazing the market can snap back this quickly. The question is, is it sustainable?"

But it doesn’t take a calculator to realise that Intel’s results means that average chip prices are declining as the world moves to netbooks and smartphones. Sales of Intel Atom chips (like that in my new Acer aspire One netbook) soared by 65% but sales of much higher priced 'enterprise' chips 'remained weak'. So I would question whether this will be translated into good news for the likes of HP and Dell. It’s another example of our Cold Tech theme – where advances and changes in technology give more users access to technology but the overall market declines as volume increases fail to compensate for declining unit prices.

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