UBS Downgrades Intel and Hewlett-Packard Citing Weak Demand

computer chipInvestment bank UBS, downgraded its rating on shares of both Intel (INTC) and Hewlett-Packard (HPQ), citing weak demand and concerns that the companies will have to cut prices in order to spur sales.

With fourth-quarter demand expected to stay sluggish, Intel is expected to cut prices on its processors by as much as 15%, UBS said in a note to clients yesterday. While the company is still likely to meet its annual sales-growth goal of at least 10% over the next three years, Intel's gross margin will be reduced by about 4% because of the price cuts, according to UBS. As a result, UBS cut Intel's stock to "neutral" from "buy," and reduced its 12-month price target for the company to $19.50 from $28.

UBS also cut HP's stock rating to "neutral" from "buy" and has a $44 price target on the stock.

Intel shares fell 1.2% to $17.90 in trading Wednesday, while HP's shares declined 2.8% to $38.81.

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