Merrill Lynch sours on Intel

Intel will need to dump older processors later this year as it prepares to launch its next-generation architecture chips, and that will hurt its earnings, Merrill Lynch analyst Joe Osha said in a report Thursday.

Merrill is cutting its expectations for Intel's earnings per share this year from $1.25 to $1.06. Osha thinks Intel will focus on gaining market share in the second half of the year, which could come at the expense of profits. With new products coming for desktops, notebooks and servers, Intel will also need to pare down excess inventory.

AMD managed to get its market share above the 20 percent line in the fourth quarter, its best showing against Intel in years. But if Intel successfully launches the Conroe and Merom desktop and notebook processors later this year, it will be more competitive in desktops and should have a greater advantage in notebooks, Osha wrote. And at that point, he thinks the stock should present a decent buying opportunity.