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Intel says it will take back share from AMD, but some are skeptical

Intel says it will take back share from AMD, but some are skeptical
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By Reuters
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By Jane Lanhee Lee and Chavi Mehta

OAKLAND, Calif/BANGALORE -Microprocessor giant Intel Corp says it will regain its footing against AMD and other chip rivals which are gobbling up market share, but Wall Street is skeptical.

The company shocked the market on Thursday with a revenue outlook that was short of Wall Street estimates by about $3 billion. The challenge from Advanced Micro Devices Inc is playing out as tech spending slumps globally, complicating Intel's efforts to clear a record inventory glut.

Intel is still the 300-pound gorilla in the market of microprocessors, called central processing units (CPUs), the brains of computers. It says it has passed through the worst of a revamp under a new chief executive.

"We lost share, we lost momentum. We think that stabilizes this year," Chief Executive Pat Gelsinger told investors on a conference call.

However, business tech spending is falling sharply as customers are wary of a recession, and consumer electronics demand has slumped after surging through the COVID-19 pandemic. That's a headwind for Intel and AMD, both of which are rolling out new chips, but Intel is facing a larger inventory correction.

The company reported $13.2 billion in inventories, equal to about 151 days of inventory, according to Bernstein analysts.

Intel still dominates the markets for PC and server processing chips, with a market share greater than 70%, tech research firm IDC calculated. But that is down from more than 90% in 2017.

"I don't think Intel is in a position yet to start recovering share. Someone going from 1% to 13% is significant. It tells you that now there's a viable second competitor in the server processor market, who has momentum and is gaining momentum," said Rau.

That competitor is AMD, which under the leadership of Chief Executive Lisa Su has come back from the brink of bankruptcy and has been taking business away from Intel quarter after quarter.

A few years ago, there was a yawning gap between the two company's market valuations. Now, they are both roughly valued at $120 billion, even though AMD's revenues for the 12 months through September were $22.8 billion, far short of Intel's $70 billion. AMD reports results next Tuesday.

Chipmaker shares were hammered across the board on Friday, but Intel led the decline, slumping by 10% while AMD lost 1.8%.

Purchasers of processors cannot launch products if new chip designs are late, and Intel has stumbled on delivering its latest data-center chip, code-named Sapphire Rapids.

"Intel had high hopes that Sapphire Rapids would enable them to take the fight to AMD," said Lucas Keh, semiconductors analyst at Third Bridge. "However, our experts say that it has been a disappointment so far because of Intel’s continuous inconsistency in delivery."

Worse for Intel, the benchmarks published by the two companies show that AMD's latest server chip outperforms Sapphire Rapids on "general purpose workloads," according to Bernstein analyst Stacy Rasgon.

Intel has other rising competitors, too. Graphics chip maker Nvidia Corp is branching out into central processors and former processor customers, including Apple Inc and Amazon.com Inc, are designing their own chips.

CEO Gelsinger said that 2023 would be a year of stabilizing then re-acceleration. Intel had taken some painful steps and now needed to execute on a good plan, he said.

Some agree.

"Intel's turnaround is taking some time, exacerbated by the economy, but I believe its plan is working," said Glenn O'Donnell, an analyst at Forrester Research. "It is delivering on new products and its manufacturing is ramping up with agreements from other chipmakers to use Intel's manufacturing capacity."

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