Concern over worldwide PC sales, or lack thereof, continues to plague Intel (INTC -0.09%) and its shareholders. Even as non-PC-related revenues improve, Intel stock is mired in a slump that has it flirting with 52-week lows.
The unexpected early retirement of CEO Paul Otellini certainly hasn't helped Intel's share price. But there are a couple of possibilities on Intel's radar that could have long-lasting ramifications and put Otellini's early retirement news on the back burner.
What's happening in Intel's world
According to an analyst at RBC Capital, Intel and iEverything maker Apple (AAPL 0.39%) are in serious discussions about having Intel take over the chipmaking duties from Samsung, which provides ARM Holdings (ARMH) chips for Apple's iPhones and iPads. Apple and Intel watchers have seen this movie before, but according to RBC, this time it's for real, and that includes a few particulars of the potential deal.
It's no secret Apple likes its ARM chips, and one of its closest rivals, Samsung, has been its supplier of choice. But demand could outpace Samsung's ability to supply, as early as next year, and it recently announced a price bump -- all of which gives a bit more credence to the current Intel and Apple discussions. What'll it mean? According to RBC, if the deal goes down, Intel could see as much as $2 billion in Apple-related revenue next year, not to mention making major strides into the mobile computing space -- a sandbox Intel has made clear it wants to play in.
Intel's been mentioned in the same breath as beleaguered, Japanese-based Sharp for some time now. As recently as two weeks ago, the rumors were that Intel and Qualcomm (QCOM 0.72%), one of its primary competitors in the mobile chip space, were going to team up and acquire a healthy stake in Sharp. Qualcomm is still in the Sharp investment picture, but it's no longer interested in a major stake.
Now, here we are two weeks later, and Sharp is courting Intel and Dell (DELL.DL) as possible suitors, asking for significant investments from each. According to The Wall Street Journal, Sharp management is looking for a total of $480 million, split evenly between Intel and Dell.
There are legitimate concerns, voiced by Sharp itself, as to whether it can continue as a viable concern if it's unable to secure funds. The benefit to Sharp of an Intel and Dell cash infusion is pretty clear: staying in business. But what does Sharp have to offer Intel or Dell that's worth $480 million?
Sharp has two primary business segments -- electronic equipment and electronic components. Though it dabbles in solar cells, satellite broadcasting, and the like, what Sharp brings to the Intel and Dell table (respectively) are displays. One display technology in particular stands out and would fit nicely in both Intel's and Dell's plans.
The latest display from Sharp is called IGZO, and any deal with Intel or Dell would have to include access to the cutting-edge technology to make sense. The new screen increases the pixels per square inch, improving resolution, while at the same time -- and this is a big one for Intel -- it uses less power than existing displays. Nice combination, particularly the increased mobile battery life -- a problem Intel's had with its underperforming Ultrabook.
Going forward
Intel's new Ultrabook with Windows 8 is hardly dead, despite rumors to the contrary. The new fourth-generation Haswell processor, Intel's self-described "once in a decade" improvement, is coming to an Ultrabook near you in 2013. The additional processing speed and the reduced power consumption of Intel's Haswell processor could be a game-changer. Now add an improved, more efficient display from Sharp, and bring the price point down a nudge, and Intel can breathe life into its Ultrabook -- a market that research firm IHS expects to grow in 2013.
With all the changes coming Intel's way -- a CEO departure, major strategic partnership possibilities, and acquisitions, among others -- some things haven't changed at all. Intel still provides shareholders with an outstanding 4.6% dividend yield, and it remains the best value in the chipmaking space. Bottom line? Virtually all mid- to long-term portfolios should have Intel inside.
