Sell Intel Stock. Chip Maker’s Business Model Makes No Sense, Says Analyst.

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Intel cut its dividend by two-thirds last month.

David Paul Morris/Bloomberg

Intel’s plan to turn itself around by building up its third-party chip-manufacturing business for other semiconductor companies faces serious obstacles, BofA Global Research says.

On Sunday, analyst Vivek Arya reiterated an Underperform rating for


stock (ticker: INTC), with a target of $25 for the price.

A “structural challenge remains [with] INTC’s insistence on a capex intensive integrated design/manufacturing model (IDM) that is forcing it to simultaneously compete against agile rivals,” he wrote. “Meanwhile the competition with ARM-based PC/server rivals is just starting.”

Intel declined to comment. In early trading Monday, the stock was down 1% to $26.15., while the

S&P 500

was 0.6% higher.

The analyst noted


(AAPL) has been gaining share, reaching about 10% of the PC market using its own internally designed chips. Apple processors use Arm Ltd. chip-architecture technology, a competitor to the x86 chip architecture used by Intel and Advanced Micro Devices (AMD).

He also said Intel faces severe challenges in catching up to other players in the third-party chip-manufacturing business. He said that

Intel Foundry Services

has less than 1% of the global foundry market, compared with 57% for

Taiwan Semiconductor Manufacturing

An additional challenge, he said, is that other chip makers could be worried that Intel’s own chips would…


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