Joe Osha Pricing Quotations

We believe that Intel will be forced to respond competitively to AMD in the coming year, which may put more pressure on Intel's pricing than we had expected.

We've seen investment in capacity go up quite a bit and we had a scare this summer with wireless. So you can make a case that the business is in trouble. We try to focus on slightly longer-term fundamentals. The relationship between spending and revenue in this business is still reasonable. Visibility is still good. Pricing is good. Let's not forget, wireless handset demand is growing 50 percent over year-on-year. So with stocks down a bit and the fundamentals still solid, we though it was time to declare the mid-cycle correction over.

We suspect that Intel will, at some point, respond with aggressive pricing rather than allow AMD to continue to build market presence.

Despite our conservative remarks on margin compression and pricing intensity, we continue to believe Intel will meet our revenue forecast and reiterate our intermediate-term neutral and long-term accumulate rating.