Intel (INTC) Report Positive for Applied Materials (AMAT), Negative for as IBM (IBM) HP (HPQ) Dell (DELL) Microsoft (MSFT)
Yesterday Intel (Nasdaq: INTC) guided full-year 2013 capital spending of $13.0 billion, plus or minus $500 million. Some investors see this as positive for names in the semi cap hardware and software space. For example, analysts at Goldman Sachs think Intel's capex spending goal is very positive for Applied Materials (Nasdaq: AMAT). However, Goldman also thinks the chip maker's capex plan might lead to margin pressure.
"As long as capex remains so high and revenue guidance is aggressive, we continue to think that excess capacity is a risk to margins," said analyst James Covello.
In short, Goldman thinks Intel's level of capital spending will lead to excess supply. If so, there is a chance Intel may reduce its capex plan later this year. This would be similar to 2012 when Intel invested $11.0 billion in capex, below its initial guidance of $12.1 to$12.9 billion, as noted in the Goldman report.
“That said, for those investors who wish to express a positive view on semi cap in light of Intel's higher than expected capex, we are very positive on Applied Materials. Our bullish view is based on a company-specific turnaround story at Applied but if we are wrong and Intel maintains this high level of capex, then that is positive for Applied," said the analyst.
Intel comments suggest softness in PC demand and a continued reduction in inventories across the supply chain. On the server side, Intel's Data Center Group showed revenue growth 4 percent.
Commenting on servers, Goldman said, "We continue to expect that component vendors such as Intel may experience more robust revenue momentum than the top-tier server OEMs due to the emergence and growth of white-box server vendors."
In other words, strength in component vendors such as Intel does not translate to top-tier server OEMs such as IBM (NYSE: IBM), Hewlett-Packard (NYSE: HPQ), and Dell (Nadaq: DELL).
"As such, we view Intel's commentary on the softness of the corporate server market as an incremental negative for OEMs such as IBM, Hewlett-Packard, and Dell," said Covello.
Weakness in PC client volume is seen as negative for Micrsoft (Nasdaq: MSFT).
For an analyst ratings summary and ratings history on Intel click here. For more ratings news on Intel click here.
Shares of Intel closed at $22.68 yesterday, with a 52 week range of $19.23-$29.27.
"As long as capex remains so high and revenue guidance is aggressive, we continue to think that excess capacity is a risk to margins," said analyst James Covello.
In short, Goldman thinks Intel's level of capital spending will lead to excess supply. If so, there is a chance Intel may reduce its capex plan later this year. This would be similar to 2012 when Intel invested $11.0 billion in capex, below its initial guidance of $12.1 to$12.9 billion, as noted in the Goldman report.
“That said, for those investors who wish to express a positive view on semi cap in light of Intel's higher than expected capex, we are very positive on Applied Materials. Our bullish view is based on a company-specific turnaround story at Applied but if we are wrong and Intel maintains this high level of capex, then that is positive for Applied," said the analyst.
Intel comments suggest softness in PC demand and a continued reduction in inventories across the supply chain. On the server side, Intel's Data Center Group showed revenue growth 4 percent.
Commenting on servers, Goldman said, "We continue to expect that component vendors such as Intel may experience more robust revenue momentum than the top-tier server OEMs due to the emergence and growth of white-box server vendors."
In other words, strength in component vendors such as Intel does not translate to top-tier server OEMs such as IBM (NYSE: IBM), Hewlett-Packard (NYSE: HPQ), and Dell (Nadaq: DELL).
"As such, we view Intel's commentary on the softness of the corporate server market as an incremental negative for OEMs such as IBM, Hewlett-Packard, and Dell," said Covello.
Weakness in PC client volume is seen as negative for Micrsoft (Nasdaq: MSFT).
For an analyst ratings summary and ratings history on Intel click here. For more ratings news on Intel click here.
Shares of Intel closed at $22.68 yesterday, with a 52 week range of $19.23-$29.27.