AMD jumps amid signs of gaining share on Intel

Jim Finkle

NEW YORK: Shares of Advanced Micro Devices Inc. jumped 5 percent on Friday as investors interpreted a sales forecast from rival Intel Corp. as a sign that AMD, the No. 2 chip maker, is gaining market share.

Intel shares fell initially but rose 1.5 percent to close at $26.08 on the Nasdaq as analysts looked beyond the current sluggishness to forecast robust sales in the first quarter of 2006, when many expect Apple Computer Inc. to begin shipping computers using Intel chips.

"Particularly when considering the incremental sales to Apple, Intel's below seasonal performance (in the fourth quarter) should contribute to above seasonal performance (in the first quarter) for revenues and margins," Citigroup analyst Glen Yeung said.

AMD has pressured Intel in recent months, especially with its Opteron chip for server computers that run networks, and analysts said Intel's mid-quarter revenue forecast on Thursday provided more evidence of that.

"AMD is picking up share versus Intel," said Paul Leming, an analyst with Soleil Securities. "Intel recognizes that's going on. They don't deny it."

Many analysts had expected Intel to narrow its sales estimate for its current quarter toward the top end of its earlier outlook. Instead, Intel stuck to the midpoint of its previous range, saying revenue would be $10.4 billion to $10.6 billion.

The midpoint of Intel's revised range was only slightly below the Wall Street average forecast of $10.6 billion.

Analysts said that investors had hoped that Intel would follow other chip makers, such as Texas Instruments Inc. and Xilinx Inc., which strengthened forecasts on Wednesday.

"The PC market is strong and Intel is putting up weak numbers," said Kevin Rottinghaus, an analyst with FTN Midwest.

FTN Midwest market research has turned up evidence that AMD continues to take market share from Intel, based on conversations with electronics suppliers in Asia.

"The implication is that AMD's market share gain is accelerating," Rottinghaus said.

Cody Acree, an analyst with Stifel Nicolaus, said that Intel's problem stems from its inability to produce enough computer chips to meet demand.

"They are capacity constrained so that there's not much ability to ship more than they've already shipped," Acree said, adding that the company's strong third quarter probably took some business from the fourth quarter.

Shares in Dell Inc., the world's No. 1 personal computer maker, rose 52 cents to $31.17. Apple shares rose 25 cents to $73.33.

(Additional reporting by Scott Hillis in San Francisco)