PC Sales Bottom? Really?

Toan Tran: Hi I'm Toan Tran associate director of the technology team and I'm here with senior analyst Andy Ng to discuss Intel's (INTC) first quarter. Hi Andy.

Andy Ng: Hi.

Toan Tran: So Intel's a big technology bellwether, how did they do in the first quarter?

Andy Ng: Obviously they where affected by the economic repression. They saw sale decline 13% sequentially to 7.1 billion. It seems like thing are definitely taking a toll on them.

Toan Tran: Where they able to provide guidance about how they are seeing the next two quarter shake out?

Andy Ng: Well they didn't provide guidance for the upcoming second quarter but CEO Paul Otellini did say that he thinks PC demand bottomed in the first quarter.

Toan Tran: Do you think PC demand has bottomed?

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Andy Ng: No I think from Intel's point of view it may have because the PC supply chain depleted their chip inventories which they are no trying to restock. So, from Intel's point of view it may have bottomed, but in terms of end market demand when we look at PC makers generally things are still pretty weak.

Toan Tran: You bring up an interesting point about the inventory destocking cycle. Over the past months semiconductor stocks have gone up tremendously as it looks the supply chain have replenished their inventories. Do you think this goes on much longer, or are we nearing the end of inventory destocking?

Andy Ng: Well it may go on for maybe another quarter, but given the weak end market demand for electronics it's difficult to see that this will turn into sustained recovery. So we think that after maybe the next quarter thing will likely stay weak for the foreseeable future.

Toan Tran: Outside of the backroom economic environment let's talk about Intel and (AMD). AMD has been doing a little bit better recently, their products are a little more competitive. Is there any threat from AMD at this point?

Andy Ng: At this point in time it's hard to see AMD being a really threat because they have given control--well they will be giving control of their chip manufacturing to Global Foundries which is a joint venture they have with the government in Abu Dhabi.

But in terms of upcoming quarters Intel remains--Intel's advantage is their manufacturing and they continue to invest heavily in the latest manufacturing technologies and that should help them maintain their technology lead in the processor space and hence help them keep their market share.

Toan Tran: So no turnaround in technology from this quarters results from Intel?

Andy Ng: No, not yet. Temporarily, like you said earlier, with the inventory replenishment, temporarily some turnaround but in will take awhile before we see a sustained recovery.

Toan Tran: What do you think about Intel right now? The stock is trading about $16 do you think investors should start buying Intel or maybe hold off a bit?

Andy Ng: When you look at the semiconductor industry stock prices tend to fluctuate industry cycles. And obviously we are in a down turn right now, so we think the stock is attractively priced and it's 5-star right now.

Toan Tran: Thank you very much Andy. I'm Toan Tran from Morningstar, thank you for watching.

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