New AMD chips could lead to lower Intel prices

The chip maker Advanced Micro Devices Inc (AMD) could gain share in the desktop Personal Computer market, thanks to its newly launched Llano and Bulldozer chips, unless their rival Intel Corp reduces prices, said Macquarie Research.

The tough competition would force Intel to lower prices which is "an additional risk to our assumption of a stable average selling price" for the second half of the year, said analyst Shawn Webster in a note to clients.

The analyst reduced his price target on shares of Intel at $ 24.60 from $ 26.70, but said the market share of Intel notebook computers is safe even though the design of AMD wins.

"Although we noted evidence of a victory for AMD CPU design for notebook computers, most companies we spoke to expect the market share of Intel CPU remains stable in 2011," said Webster.

The analyst maintained his rating to "outperform the market average" on the company stock.

Intel, whose chips are used in 80 percent of the world's personal computers, said it expected sales of its computer unit to grow as a percentage of "low double digits" this year.

Webster said that higher costs would make Intel's gross margins come down in the second quarter to 61 percent from the first quarter, a figure that should be the lowest for 2011.