Component tightness bodes well for margins per Citigroup.
Dell indicated that certain components were tight in the quarter. As we wrote on 11/4/07, our checks suggest Intel's lead times have stretched and subsequent checks indicate that Intel is not currently able to meet customer demand. In particular, notebook component demand has been particularly strong (Dell expects notebooks to outgrow desktop by 6x in the next several yrs), boding well for Intel's margins. While notebook die sizes have increased in the move to Core, pricing remains 85% above desktop prices based on an unweighted average of all SKU's, underscoring the margin benefit. Meanwhile, our checks further suggest that Intel is again "cherrypicking" business, helping ASP's to remain stable (or even up) in 4Q07.