Auriga USA has cut the profit estimates and price target of chip maker Intel (Nasdaq: INTC) on weaker PC fundamentals.

"We now see notebook unit shipments potentially turning negative in Q3, with some rebound in Q4, but at a pace that is still well below normal seasonality. Motherboards seem to be relatively stable near-term, but Q4 is likely to turn negative as well," analyst Daniel Berenbaum said in a note to clients.

The brokerage now expects third-quarter notebook unit shipments to be flattish or even down low single digits quarter-over-quarter, with the fourth-quarter notebook units potentially being up high single-digits off the lower base.

Analyst Chris Caso of Susquehanna Financial also said the near-term issue for second half 2010 is the gap between demand and prior expectations, and the inventory built as a result.

"Our checks still point to flat to very slight Q/Q notebook production growth in Q4 as this excess inventory is adjusted. For Intel in particular, we think this correction will necessitate a production adjustment that would negatively affect Q4 gross margins," Caso, who has a "neutral" rating on the stock, said in a recent note.

Berenbaum, who cut his price target on Intel stock to $22 from $25, said near-term risk to consensus estimates could still drive stock price downside.

The analyst also reduced his third-quarter forecast to pro-forma earnings of 51 cents per share on revenue of $11 billion from 54 cents per share on revenue of $11.5 billion. Wall Street expects Intel to earn 50 cents a share on revenue of $11.08 billion.

Berenbaum also cut his 2010 estimates to pro-forma earnings of $1.95 a share on revenue of $43.4 billion from $2.04 a share on revenue of $44.4 billion. Wall Street expects the chip giant to earn $1.96 a share on revenue of $43.61 billion.

However, Berenbaum has a "buy" rating on Intel and said "semiconductor stocks tend to trade as a group, and our negative overall bias on cyclical semis makes this buy rating stand out."

"Quite simply, our work suggests that, despite broad uncertainty in consumer and enterprise spending, Intel has a strong product cycle in the best secular growth segment -- to wit, its Nehalem server processor offering for data center," Berenbaum added.

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