Two tech giants both drew attention with their earnings calls, yet they delivered completely opposite assessments of the memory chip market. The outcome for both stocks, however, was exactly the same: steep declines.
Intel (ASX: INTC) shares took a heavy hit on Friday, falling 28%, after the company issued a warning about its performance this quarter. The core reason for the warning is that the memory chip shortage has driven up personal computer prices, prompting consumer resistance. Intel CEO Lip-Bu Tan believes that given the state of the memory chip market, the operating environment will become more challenging over the next few quarters. "Customers have signaled that the PC market is starting to weaken due to memory chip prices and supply conditions," Tan said. "Terminal system prices have risen sharply this year, putting further pressure on already limited IT budgets. Over the past two months, the PC industry's adjustment pace has accelerated, and original equipment manufacturer (OEM) partners are actively managing inventory to align with weak end-market sales."
He added: "We expect this market environment to persist until memory chip supply and prices return to normal levels. Although the PC market will face difficulties over the next few quarters, our product roadmap continues to improve, and the long-term outlook remains positive."
In contrast, listening to the earnings call of memory chip maker SanDisk Corp. (ASX: SNDK) on Thursday evening, you would hear a completely different message: SanDisk believes there is no memory chip shortage at all, and that industry conditions will improve significantly over at least the next few months. SanDisk CEO David Goeckeler said: "Our internal model covers all segments of the NAND flash market. PC, smartphone, and data center businesses will all achieve positive growth next year, as data storage demand per device continues to rise, while the mix of high-end products keeps increasing." He also said: "There is no doubt the market is going through a correction. In terms of shipment volumes, on a year-over-year basis, we are in the most painful phase of the adjustment, but we believe conditions will gradually improve from here."
Intel trading: $65.42, down $26.65 (-28.95%), as of 11:55 a.m. Eastern Time, intraday trading. SanDisk shares fell 8%, most likely dragged down by Intel's pessimistic warning. So who is right about the memory chip market? The truth lies somewhere between the two views. But one thing is clear: a chip shortage benefits no one, and shareholders of both Intel and SanDisk are suffering equally.
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