Mercury Research released its estimates for fourth-quarter microprocessor market share.
Intel's (ticker: INTC) total fourth-quarter unit share increased 150 basis points sequentially to 84.8%, its highest since third-quarter 2002, with gains across the server, desktop and notebook segments. Despite Intel's share gains in the fourth quarter, we believe the company is too optimistic in its growth expectations as it expects above-seasonal growth in every quarter after the first quarter and is increasing capital spending by almost 20%. We remain Neutral on Intel until it adopts a realistic stance on its growth prospects.
Intel share reaches another 10-year high. On a total microprocessor unit (MPU) unit basis, Intel gained roughly 150 basis points of unit share from 83.3% in third-quarter 2012 to 84.8% in fourth-quarter 2012, its largest share since reaching 86.8% in third-quarter 2002, due to gains across the server, desktop and notebook microprocessor segments.
Intel's server MPU unit share increased roughly 20 basis points sequentially from 95.5% in third-quarter 2012 to 95.7% in fourth-quarter 2012, while Intel's desktop MPU unit share increased 80 basis points sequentially from 79.7% in third-quarter 2012 to 80.5% in fourth-quarter 2012. Intel's notebook MPU share increased 200 basis points sequentially from 85.0% in third-quarter 2012 to 87.0% in fourth-quarter 2012. Intel's total market share, including only Intel and Advanced Micro Devices (AMD) units, increased 150 basis points quarter-over-quarter from 83.8% in third-quarter 2012 to 85.3% in fourth-quarter 2012.
We believe Intel gained share in server MPUs due to strong demand for Romley-based multi-processor servers. In the desktop MPU segment, we estimate Intel benefited from the ramp of its Core i3 Ivy Bridge desktop MPU. We believe Intel's gains in the notebook MPU segment were driven by lackluster demand for AMD's mainstream "Trinity" platform.
Total MPU shipments decreased 6% quarter-over-quarter in the fourth quarter, well below normal seasonality of down 1% quarter-over-quarter due to slowing PC demand and share loss to tablets. We note microprocessor shipments have now declined sequentially in four of the last five quarters.
We expect Intel's unit share to increase roughly 50 basis points quarter-over-quarter from 85.3% in the fourth quarter to 85.8% in first-quarter 2013 due to share gains across all segments driven by its superior performing Romley and Ivy Bridge platforms, coupled with soft demand for AMD processors.
We expect Intel's unit share to increase 110 basis points year-over-year in calendar 2013 from 85.3% exiting the fourth quarter to 86.4% exiting fourth-quarter 2013 as we expect Intel to gain share from AMD across the server, notebook and desktop segments driven by superior products.
We are maintaining our December 2013 price target of $19.00 or 10 times calendar 2013 earnings per share, in line with Intel's peers. We remain Neutral.
While AMD appears inexpensive at 0.4 times calendar-2013 sales, the lower-end of its historic range, we believe the stock will remain under pressure given weak PC demand, share loss, and AMD's lack of profitability. We remain Neutral.