Intel’s expansion plans worry some analysts

One big concern for Wall Street analysts following Intel’s earnings announcement Thursday was the company’s plan to spend $13 billion (plus or minus $500 million) on its chip manufacturing operations this year.

Many analysts think the company is being overly optimistic about the market for the chips that will be produced in those factories. Here are several comments they offered in reports to their clients today:

“We just do not see why Intel needs to spend massive amounts on capacity,” groused Raymond James analyst  Hans Mosesmann, noting that the $13 billion is 18 percent more than it spent in 2012 and 20 percent more than in 2011.

“We believe the company is too optimistic in its growth expectations,” added J. P. Morgan’s Christopher Danely. “We do not believe Intel can generate sufficient demand to fill its increasing capacity.”

Stacy Rasgon of Bernstein Research termed the $13 billion “a staggering amount” and predicted it “will fuel investor uncertainty in coming months.”

But during a conference call to discuss the company’s earnings report, CEO Paul Otellini defended the decision to spend heavily on its plants, which it calls fabs.

“We need those factories,” he said. “Those leading-edge fabs are the single greatest asset we have.”

On Friday, Intel spokesman Jon Carvill also took issue with the notion that there won’t be enough buyers for Intel’s chips.

“As we enter 2013 we’re now in a space where the computing market is growing overall” with ultrabooks, tablets and other chip-powered gadgets, he said, noting “we’re very well positioned in all of those segments.” In addition, he said, “we also continue to have a strong data center business that will continue to grow in 2013 as well.”


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