Intel is underestimating the power of its rivals, a leading analyst has warned.
As the two outfits are trying to eat into each other's territory, both are talking up their chances of success. However, according to CLSA Asia-Pacific Markets analyst Srini Pajjuri, in Intel's case it is all spin - and the outfit is vulnerable to economics in the short term and ARM in the long term.
Initially Intel's problem is going to be dealing with a downturn in the PC market which it has underestimated.
He wrote that Intel's outlook for the current quarter is likely to be short of Street expectations thanks to "mid-single-digit PC unit growth in 2011." Chipzilla has been telling the world and its dog that PC unit shipments will expand by double digits on a percentage basis this year.
Pajjuri told Barrons that Intel will report second quarter revenue inline with the guidance range for $12.3-13.3 billion. However, the Q3 outlook is mostly behind and the consumer PC demand environment remains underwhelming, he said. All this should be rosy as Sandy Bridge should be ramping up and selling like hotcakes, according to Chipzilla spinners.
Intel has also been hit by supply shortages following the Japan quake, Pajjuri claimed.
For Q3, he expects Intel to offer flat to slightly up revenue growth guidance, which is well below the predicted five percent. These figures are even worse than Pajjuri's early pessimistic estimate of three percent growth.
But that is not as bad as the future that Pajjuri is seeing for Intel, thanks to ARM. He thinks that ARM will win the battle of the mobiles and start eating into Chipzilla's hallowed PC market. Like we've been saying all along.
In other words, Intel will recover from one problem only to be hit by a very severe amount of competition from ARM.