Markets & Finance

CSFB Turns Thumbs Down on Intel


The chipmaker's stock fell on Friday after the firm downgraded its recommendation on the shares to underperform

Can Intel's (INTC) CEO Paul Otellini turn around the computer chip maker? Credit Suisse analyst Michael Masdea says the Santa Clara company faces tough competition and downgraded his opinion on the stock to underperform from neutral on Jan. 5.

The stock was trading at $21.03 near closing time on the Nasdaq, down 0.7% compared to the previous session's close. Credit Suisse's target price on the stock is $19 per share.

Intel has recovered in recent months from its low of the year at $16.75 on June 13. As competitors like Advanced Micro Devices (AMD) steal away customers, Otellini has been battling to win back investor confidence. Intel has sold off some divisions in recent months, including its wireless chip operation to Marvell (MRVL). Otellini also plans to let go of 10,500 people by the middle of next year in a broad corporate restructuring that aims to cull $2 billion in operating expenses in 2007 and $3 billion by 2008.

"While the near-term outlook remains positive, we believe recent fundamental strength and cost improvements are largely priced in," Masdea said in a research note. (Credit Suisse does and seeks to do business with companies covered in its reports.) He was reinstating his coverage of the stock following the close of Intel's sale to Marvell. "Investors under-appreciate how competition is driving accelerated spending even as Intel loses share and the end market growth rate slows."

In one example, Otellini's long-term plan to fight back against AMD is to accelerate product development. On Apr. 27, he said Intel plans to push out major revisions of its chip designs every two years. That's a significant change: The current line of chips, for instance, builds mostly on the six-year-old design of the Pentium 4 processor.


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