Intel reports blame Pakistan for limited success in Afghan war: NYT

Two new classified intelligence reports on the war in Afghanistan say there is a limited chance of success unless Pakistan hunts down insurgents operating from havens on its Afghan border. PHOTO: FILE/REUTERS

WASHINGTON:?Two new classified intelligence reports on the war in Afghanistan say there is a limited chance of success unless Pakistan hunts down insurgents operating from havens on its Afghan border, The New York Times reported on Tuesday.

The National Intelligence Estimates offer a more negative assessment than a review of the US war strategy that the Obama administration is set to unveil on Thursday.

The intelligence reports – one on Afghanistan and one on Pakistan – say that although there has been progress in the war, Pakistan’s unwillingness to shut down militant sanctuaries in its tribal region remains a serious obstacle, The New York Times reported.

The White House said on Tuesday that the war strategy review has determined that a troop increase led to important progress in the nine-year-old war which may permit some US soldiers to withdraw from Afghanistan next July.

Obama ordered 30,000 more US troops to Afghanistan a year ago with the goal of turning the tide against a resurgent Taliban.

The Times said the findings of the intelligence community were provided to some members of the Senate and House Intelligence Committees last week and were described by a number of US officials who read the executive summaries.

US military commanders and senior Pentagon officials have already criticised the reports as out of date and written by Washington analysts who have spent little time in the war zone, the newspaper said.

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Intel And Microsoft Squeeze Symantec In Security Software

Not in an enviable spot

Microsoft recently started to offer an antivirus software product “Security Essentials” for free to businesses with 10 or fewer PCs and started to distribute the software through its Microsoft Update distribution system. ^[]

We believe that this step could further hurt antivirus software companies, especially Symantec, which is the dominant player in this market through its flagship product Norton. Intel also announced its acquisition of McAfee, which is in the process of being finalized and could present future challenges for Symantec given that it is a well known brand for antivirus software.

With Microsoft and Intel moving more aggressively into this space, we could see the landscape for antivirus software quickly change in the coming years. Below we assess the potential market share impact for Symantec. We currently have a price estimate of $22.33, roughly 30% above the current market price.

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Microsoft Security Essentials

Security Essentials was introduced in September 2009 and replaced Microsoft’s paid Windows Live OneCare subscription service. According to an accuracy rating agency, Security Essentials identified 98% of over half a million malware samples, ^[] which was second behind Symantec’s Norton. ^[]

The fact that Microsoft’s Security Essentials is free and conveniently installed through the Windows Update system gives Microsoft a distribution advantage and so consumers could opt for Security Essentials and replace Symantec’s Norton antivirus software. Moreover, the decision to provide Security Essential to businesses with 10 or fewer PCs for free could also enable Microsoft to gain a foothold with growing businesses that could become larger paying enterprise clients in the future.

Norton’s Current Leadership Threatened

Norton antivirus software constitutes around 29% of the $22.33 Trefis price estimate for Symantec’s stock. Symantec’s Norton is the market leader in the antivirus software market with a share of around 52% as of 2009. We believe that Symantec will slowly continue to lose market share to around 46% by the end of Trefis forecast period; however this could accelerate if competition heats up from tech giants Microsoft and Intel.

Symantec has lost share in the past in part due to higher prices than competitors and due to the fact that Norton’s PC requirements frustrates some users. Norton antivirus software is priced at $39.95 ^[], which is much higher than many antivirus products in the market (like AVG, Kaspersky Labs, Trend Micro and CA), and its software can be difficult to uninstall which frustrates some users.

Norton Antivirus 2011 promises better features like faster installation and faster virus scans. Another important security feature includes Norton’s approeach to virus and spam detection. Its new software will run behavior and reputation-based checks rather than the signature-based check which should make it more accurate. It works on the principle that a file or an email credentials will first be checked against Symantec’s server, which will have an extensive database of known issues. This proactive rather than reactive approach to software security holds a lot of promise in our view.

Due to its market leadership and new products, our base case suggests that Norton’s market share may not decline at a faster rate. However, the dual threats of Microsoft and Intel in its core businesses is a concern.

There could be downside of more than 10% for Symantec’s stock if its market share declines to 30% by the end of Trefis forecast period, instead of 46% that we forecast. This does not factor in potential pricing declines due to heightened competition which could add further pressure in this scenario.

You can see the complete $22.33 Trefis Price estimate for Symantec stock here.

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AMD Stock Price Sensitive To Intel Market Share Theft

Stands to gain nicely from market share steals

Intel dominates the notebook processor market with an estimated 86% market share while AMD controls almost 14% by our estimates. ^[] We currently have a Trefis price estimate of $25.53 for Intel’s stock and a price estimate of $8.07 for AMD’s stock.

While Intel dominates, competition is becoming more intense with each company rolling out newer integrated computing and graphics platforms. At the core of this is a fight for market share.

We forecast market share remaining stable for both currently but note that a hypothetical 5 percentage point increase implies 2.5% upside in our share price estimate for Intel and 11% for AMD. So the little guy clearly has more to gain. See our modifiable charts below.

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In September 2010, Intel launched its second-generation core architecture, Sandy Bridge, a 32-nanometer chip that can put CPUs and GPUs onto a single piece of silicon designed for tasks like handling high-definition video.

Intel management immodestly called Sandy Bridge the largest increase in computing performance in its history and places high expectations on its business impact. ^[] The company began large-scale production this past quarter and expects to start earning revenues on these shipments in Q4 2010.

In response, AMD introduced Llano accelerated processing unit in October 2010, a part of the company’s Fusion initiative. Some of tasks carried out by Llano include calculating the value of Pi to 32 million decimal places and decoding HD video from a Blu-ray disc, as claimed by AMD. ^[] Production is slated for earlier next year after rumors of some delays.

While performance tests for both have been good so far, we won’t see the data on a large scale until next year. So until then, who do you think will gain share?

Our complete analysis for Intel’s stock is here.

Our complete analysis for AMD’s stock is here.

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AMD Stock Price Sensitive To Intel Market Share Theft

Stands to gain nicely from market share steals

Intel dominates the notebook processor market with an estimated 86% market share while AMD controls almost 14% by our estimates. ^[] We currently have a Trefis price estimate of $25.53 for Intel’s stock and a price estimate of $8.07 for AMD’s stock.

While Intel dominates, competition is becoming more intense with each company rolling out newer integrated computing and graphics platforms. At the core of this is a fight for market share.

We forecast market share remaining stable for both currently but note that a hypothetical 5 percentage point increase implies 2.5% upside in our share price estimate for Intel and 11% for AMD. So the little guy clearly has more to gain. See our modifiable charts below.

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In September 2010, Intel launched its second-generation core architecture, Sandy Bridge, a 32-nanometer chip that can put CPUs and GPUs onto a single piece of silicon designed for tasks like handling high-definition video.

Intel management immodestly called Sandy Bridge the largest increase in computing performance in its history and places high expectations on its business impact. ^[] The company began large-scale production this past quarter and expects to start earning revenues on these shipments in Q4 2010.

In response, AMD introduced Llano accelerated processing unit in October 2010, a part of the company’s Fusion initiative. Some of tasks carried out by Llano include calculating the value of Pi to 32 million decimal places and decoding HD video from a Blu-ray disc, as claimed by AMD. ^[] Production is slated for earlier next year after rumors of some delays.

While performance tests for both have been good so far, we won’t see the data on a large scale until next year. So until then, who do you think will gain share?

Our complete analysis for Intel’s stock is here.

Our complete analysis for AMD’s stock is here.

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Intel Can Kiss $29 With Smartphone Chip Growth Surge

Deals like the one with Infineon help Intel grow its mobile chip business

Intel plans to acquire the wireless business unit of Infineon Technologies AG in an attempt to deepen its penetration of the mobile device market. Historically, Intel has focused on producing chips and processors for PC manufacturers competing with the likes of AMD and nVIDIA, and we see its recent move as a way for the company to broaden its business focus and participate in the growth of the mobile device market.

Together with its Atom processors, we expect higher revenue growth from the mobile chipset segments, which currently accounts for just under 9% of the Trefis price estimate. Higher chipset growth could represent an additional 8% upside to the scenario we include below. We have a current Trefis price estimate of $26.50, which is about 30% ahead of the current market price.

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Broadening its Mobile Business

Intel’s ultra low voltage Atom microprocessors were introduced initially to power netbooks and small desktop computers. However in early 2010, Intel launched Atom processor for smartphones and tablets.

Atom opened the door for Intel into a lucrative but crowded smartphone market populated by well established and formidable players. Given the more fragmented market than its dominant PC business, the company needed a range of mobile phone offerings in order to compete effectively.

Infineon’s products are currently used in mobile devices made by Apple, Nokia and RIMM, and we believe this latest move will help Intel establish a significant presence in the mobile market.

Smartphones Growing Faster Than PCs

IDC estimates that in 2010, mobile phone vendors will ship nearly 270 million smartphones compared to 173.5 million in 2009 ^[1], an expected growth rate of 55%. This growth rate is double the expected growth for global PC shipments.

We estimate that Intel’s mobile chipset business grew from $2.4 billion in revenues in 2005 to about $4 billion in 2009. We currently estimate that this will grow to nearly $6 billion by the end of our forecast period. However, given the rapid rate of growth in the smartphone market, our estimates may prove to be significantly conservative. If mobile chipsets grew to be a $10 billion annual revenue business for Intel, there would be 8% upside to the current Trefis price estimate for Intel.

You can see the complete $26.50 Trefis price estimate for Intel’s stock here.

Notes:

1. Worldwide Converged Mobile Device Market Projections Raised 10% for the Year, Says IDC [?]

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Intel Should Be $26 But Not Because Of Atom Chips

Intel's Atom is a market share champ but doesn't do much for the stock price.

Since their launch in 2008, Intel’s Atom microprocessors have dominated the global netbook market. In addition to netbooks, the Atom microprocessor is used in a variety of other places including smartphones, tablets, car infotainment systems, smart TVs, low power consuming servers, and energy management systems.

Despite this, Atom’s rising market share will have minimal impact on Intel’s stock since these ultra low voltage microprocessors account for only around 2% of Intel’s stock price, based on our estimates. Intel’s Atom competes with AMD’s Athlon Neo, Qualcomm’s Snapdragon, and Nvidia’s Tegra microprocessors. We currently have a Trefis price estimate of $26.50 for Intel’s stock, about 32% above the current market price of $20.

Will Atom’s market share increase?

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In the past, Atom’s market share of the combined netbook and smartphone market has increased from an estimated 8% in 2008 to 13% in 2009 ^[], attributable to the rise in netbook shipments from around 11.4 million in 2008 to 26.5 million in 2009.

The average forecasts for Atom’s market share created by Trefis members indicates a projected increase from 14.3% in 2010 to 23.2% by the end of the Trefis forecast period. This is in comparison to the baseline Trefis estimate of an increase from 13.5% in 2010 to 20.5% during the same period ^[]. If the member estimates are indeed true, it would imply an upside of 1% to the Trefis price estimate for Intel’s stock.

Going forward, we expect Atom’s market share to grow as it expands into the competitive smartphone and tablet PC market. Intel has partnered with Nokia to develop an OS named MeeGo, a Linux-based software platform which is compatible with Atom’s x86 architecture and will support a broad range of devices including tablets, mobile computers and media phones.

In its quest to break into the Android-based smartphone market, Intel ported Android to its Atom processor platform in early 2010, paving way for the companies to develop Android-powered smartphones based on Intel’s Atom processor. Despite this, the smartphone market remains dominated by ARM technology-based processor chips. If Atom-based smartphones gain traction, there could be further upside to our estimates.

Our complete analysis for Intel’s stock is here.

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