The company's stock closed down 3.25 points to 76.19. Merrill analyst Joe Osha downgraded the stock to near term "accumulate" from near-term "buy."
The news comes just as the Santa Clara, Calif.-based chipmaker received federal regulatory approval to acquire wireless chipmaker DSP Communications.
"Our concerns include Intel's memory road map, next year's IA-64 launch and competitive pressure from Advanced Micro Devices. We are therefore reducing our intermediate term rating from buy to accumulate. Our long-term rating of "buy" remains unchanged," Osha wrote in a report.
"The number of challenges facing [Intel] for the next 12 months continues to mount," he wrote.
Osha cut his price target on the stock to $90 from $100. He also trimmed the outlook for fiscal 2000 earnings per share to $2.55 from $2.69.
Merrill Lynch cited increasing competition from AMD as one of the reasons for the downgrade. As reported yesterday, AMD said it stands a good chance of breaking even in the fourth quarter, substantially better than the large loss expected earlier, because of improved sales of flash memory and microprocessors. The company also outlined its product road map for 2000. Although Merrill analysts said they were upbeat about the AMD meeting, they did not change the rating on the stock.
In another report on AMD, Osha stated: "Despite the improved earnings outlook, however, we are not changing our intermediate-term and long-term neutral ratings. We believe that AMD is going to encounter the same competitive response from Intel as it attempts to ramp the Athlon as it did during the ramp of the K6. Intel has the ability to drop prices aggressively on the PIII lineup if it wants to, especially given Intel's own recent move to the P858 0.18 micron process."
By contrast, Dan Niles of BancBoston Robertson Stephens raised estimates for AMD for the quarter from a loss of 60 cents to a loss of 10 cents and doubled estimates for the year 2000 from 35 cents a share to 70 cents a share. Niles also hiked the three to six month target price to $30.
Osha added that next year's launch of the IA-64, the next generation of major Intel chips, "will prove disappointing to investors who have high expectations for the first generation of that product."
Also yesterday, a number of major PC manufacturers said they can't get many of Intel's "Coppermine" Pentium III processors, especially the fast 700-MHz and 733-MHz versions.