Intel Regains Lead in U.S. Retail Market with a Push from Notebook Sales

| July 13, 2006 | Notebook Computers - U.S. | Product Release |

Analysts: Nicole D'Onofrio, Matthew Sargent

Announcement Summary

Intel regained its lead in the U.S. retail market after a five-month hiatus as the CPU leader. In June 2006, Intel recouped some of its market share loses, just barely surpassing AMD with a 51.2% market share in the U.S. retail channel (for both notebooks and desktops). Intel’s overall success in June was derived from a strong push in the notebook segment, which allowed Intel to recover from its 60%-or-below share figures in the U.S. retail notebook market. However, AMD continued to dominate the U.S. retail desktop market.

Below is a chart highlighting the chip manufacturers’ respective market shares in the U.S. retail PC market for both notebooks and desktops.

Analytical Summary

Current Perspective: Current Analysis takes a positive stance on the Intel’s short-term share gains in the notebook retail market. Intel and Toshiba proved to be a powerful duo during the month of June (which included sales from the Memorial Day holiday), as the pair teamed up to offer aggressive promotions and low price points.

Toshiba accounted for almost 50% of all of Intel’s U.S. retail notebook sales in June 2006, stealing Intel share from HP’s Compaq brand, from Gateway and even a few points from Sony. Toshiba’s aggressive marketing strategy in June rejuvenated the manufacturer’s market share, which has been declining since the beginning of the year, due to competitive pressure from HP and Gateway.

In June, Toshiba played heavily in the value segment, pummeling the channel with promotions on its Cel M product lines, which generated almost 60% of Toshiba’s total sales. During the highest sales week in June, week ending June 3, 2006, Toshiba’s pricing and promotional strength, with five promotional spots advertising sub-$599 notebooks after rebate, was challenging for other manufacturers to match. HP only had two offerings that were below $599, although notably, it did have three more that came in right at $599. The Toshiba/Intel pair is not only a threat to AMD but also to AMD’s partners, HP and Gateway. HP’s Compaq brand in particular has relied on AMD processors -- both Sempron and Turion 64 -- to compete in the value market.

However, the question remains: Is this a sustainable strategy? While Toshiba experienced the highest year-over-year growth in unit sales, it was second to HP in year-over-year revenue growth. This demonstrates that while Toshiba’s push in the value market generated strong sales growth, it did so at the expense of revenue and probably of profit too. However, in Toshiba’s defense and as evident from its product assortment shown in the graph above, the manufacturer has a solid base of Core Solo and Core Duo products. Toshiba will need to rely heavily on its Core Duo line to recoup any lost revenue that its Cel M product line may induce.

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