BlueFin Warns Intel Negative Pre-Announcement A 'Strong Possibility'

Intel Corporation INTC, among other names in the PC sector, has seen a rough start to 2016, down roughly 8 percent year to date. This dampering has no gone unnoticed, and BlueFin Research Partners calls the situation a "growing concern."

"While it's still early, we can't help but feel a sense of Déjà vu with haunting memories of the serial forecast cuts of early 2015 by the PC OEMs," BlueFin elaborated.

Related Link: Baird Upgrades Intel To Outperform

Concerns And Reactions

BlueFin's recent PC market update included six key takeaways outlining the concerns facing the PC sector thus far in 2016.

1. Anemic Shipments "HDD and PC shipments anemic," BlueFin stated, "Look out for chaotic end of quarter activity."

2. Resulting In Slashed Forecast Compared to the consensus of 67 million, the PC OEM shipment forecast has been reduced to 63 million.

3. Company-Slashed Estimates Raise Red Flags "Mid-March production estimates at Intel (INTC) indicate further decline and well below forecasts at outset of the quarter," BlueFin lifted as an example. "While we view INTC's long term prospects favorably due to increasing Data Center exposure and a corresponding reduced reliance on the PC market, we would be cautious on the name in the near term based on the current state of PC demand."

4. Intel Justifies Caution As Negativity May Ensue "If this pace (production estimates declining) continues thorugh the end of the month, our March quarter production level estimates will result in a sequential decline of 5–6 percent. This is well below INTC's planned material forecasts at the beginning of the quarter, which indicated a flattish outlook. We believe INTC is adjusting production to reflect the realities of waning PC demand. When INTC reduces output mid-quarter, it is a ‘red flag' warning that demand is tracking below expectations at the outset of the quarter. Based on our reads, we would not be surprised to see INTC negatively pre-announced."

5. Cut in HDD Builds HDD Builds for the first quarter have been cut to below 95 million. The second quarter is in for the same. "With only two weeks to go in the quarter, we are picking up even further HDD build reductions for the first half of 2016," said BlueFin.

6. HDD Shipments Influenced As Well "HDD Shipments will likely top 100–102 million in Q1 and Q2 with expected inventory depletion," BlueFin surmised, "Once again for perspective our 410–420 million forecast for 2016 is approximately 20 million lower than consensus and IDC/Gartner views at this time. Similar to last year when we were far more vocal on HDD shortfalls than consensus we see this playing out once again thus far in 2016."