Why I Own Intel Stock

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I've been bearish on Intel (NASDAQ: INTC  ) for years. Smaller rival Advanced Micro Devices (NASDAQ: AMD  ) always seemed like a credible threat, not to mention a more promising investment for the long term. But times have changed.

Now I own Intel stock and have a thumbs-down CAPScall riding on AMD. How did that happen?

First, AMD made some huge mistakes that effectively erased Intel's threat from below. AMD's momentum in laptop and server chips faded due to a series of rash management changes, surprising product delays, and a spirited response from Intel's own engineers. The underdog is currently fighting for its financial life, and hardly in a position to kill Intel anymore.

At the same time, the computing market is changing fast, with disastrous results for Intel's stock. Apple (NASDAQ: AAPL  ) and Google (NASDAQ: GOOGL  ) are replacing traditional laptops and desktops with newfangled smartphones and tablets by the millions. Neither Intel nor AMD are big in the mobile computing space, where alternative chip architect ARM Holdings (NASDAQ: ARMH  ) reigns supreme.

As a result, Intel's top- and bottom-line growth stalled out. Analysts, watching Intel through their usual short-term lenses, think the world is collapsing. That's why Intel's stock price plunged 24% over the last year. Meanwhile, the company keeps increasing dividend payouts with relentless regularity, pushing yields up to a sensational 4.2%.

INTC Revenue TTM Chart

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INTC Dividend Chart

INTC Dividend data by YCharts.

I'm sure that Intel will come roaring back in the long run. For one thing, all these mobile gadgets still need to be served data from increasingly powerful data centers. Nobody can challenge Intel in that market.

For another, the chip giant hasn't given up on tablets and smartphones. Intel's mobile products creep ever closer to ARM's designs in terms of low-power performance, and Google's Android software was always compatible with this architecture. On the Apple side, Intel may soon start manufacturing Cupertino's mobile chips as the fruit moves away from longtime partner Samsung.

So this stock is getting the death penalty for a short-term misdemeanor. One or more of the company's long-term plans will surely keep the sector veteran afloat and thriving for years to come. That's why I locked in a fantastic entry price and earnings yield by buying Intel stock in December.

Intel shares are fantastically cheap right now, paired with a brilliant dividend yield. And I do believe that rumors of Intel's death have been greatly overstated. What's not to love?

When it comes to dominating markets, it doesn't get much better than Intel's position in the PC microprocessor arena. However, that market is maturing, and Intel finds itself in a precarious situation longer term if it doesn't find new avenues for growth. In this premium research report on Intel, our analyst runs through all of the key topics investors should understand about the chip giant. Click here now to learn more.

Read/Post Comments (5) | Recommend This Article (8)

Comments from our Foolish Readers

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  • Report this Comment On April 04, 2013, at 12:09 AM, rav55 wrote:

    Why do folks rave about Intel? The lost 30% of there value since April 2012. Intel is not a growth stock. It sells a commodity that it once held in a near monopoly and despite that monopoly still couldn't manage to compete with a pint sized upstart called ARM nor did it anticpate the huge growth in mobile silicon. That in itself was a failure in intel and prognostication every bit as huge as the CIA failing to predict 911 or the attack on Pearl Harbor. ARM launched an attack on Intel and Intel lost.

    The success of that attack is significant in that it finally opened the eyes of the consumer on that what they hold in their hand is good enough to get the job done. It is not necessary to purchase the latest new cpu that only through some very esoteric and onscure benchmarks are only marginally superior the low cost competitor.

    The greatest weakness that Intel has holding it back from total dominance of the consumer x86 market is it's inability to design a credible 3d graphics core competitor.

    AMD Fusion APU's romp all over the 'bridges, and nVidia gets $250 million a year from the blue men for stealing nVidia patents. Forgiveness rather than permission seems to be the policy of the Intel Board.

    The world is moving quickly to the quality of the graphical user interface and that is where Intel is weakest. The 3d graphics patents are sewn up by AMD and nVidia and yes a few that failed are now owned by Intel.

    But now, multicore game development will now show just how weak Intel is. Infact the Intel/nVidia show is so weak that Sony, Microsoft and Nintendo all went to AMD Radeon. In this case it was not about the margins but rather it was about just how able is AMD to eveolve the product compared to Intel and nVidia.

    Graphics is key. Remember back in the early nineties when you bought a cpu AND a math co-processor? Then math co-processors went on die andso ended that math cpu. SOC kiled Northbridge and South Bridge and incidentally a huge protion of the nVidia product line; no more nvidia chipsets.

    AMD is now taking that concept further. A few months back Intel announced Xeon Phi, the $2300.00 1.08 teraflop Knights Corner accelerator and Intel bragged how it was the first 1 tflop cpu! Well AMD is putting 1.8 teraflops in a gaming console. To the tune of 18-20million units per year of new sales. That is growth.

    That is a credible threat!

  • Report this Comment On April 04, 2013, at 2:38 AM, badkat7 wrote:

    The reason that Intel stock continues to do little or nothing is simple; they have failed to diversify, they have missed the mobile revolution (in particular phones and tablets) and have also failed to penetrate markets such as Home, Automobile (from engine management to in-car entertainment). They have dabbled unsuccessfully so many times it is clear that something in their internal culture is stopping them. I suspect this is because the culture that works so well for silicon, and for non-commodity products, just doesn't apply well to commodity items (aka mobile, home, auto etc).. So basically Intel is shutting itself out of growth markets. I hope that with the departure of Mr Otellini that Intel will find inspired leadership who realizes that a moribund corporation is a dead one; and that Intel must stop its silly one-culture-fits-all solution.

  • Report this Comment On April 04, 2013, at 12:11 PM, Hoptopia wrote:

    I've worked with the Enterprise products from Intel and AMD for years. They both build a great CPU. AMD finds itself up to its eyeballs in debt after years of trying to compete with Intel. I personally don't see them lasting much longer but I'm a compute dude and customer not a financial guru.

    If you don't think Intel has room to grow then you don't know much about this thing called the cloud and what runs it.. Facebook has 180,000+ servers just to run that jaugernaut of useless social media. They do this all on custom servers running Intel processors. Cisco, IBM, HP and Dell all run Intel as their dominant brand CPU. Until somebody finds a way to provide content in a real cloud.. Intel is the big dog with plenty of room to grow.

  • Report this Comment On April 05, 2013, at 9:58 AM, rav55 wrote:

    The problem with server farms are not only are they expensive to purchase but they are expensive to operate in terms of energy use.

    Cloud schmoud the buzz word doesn't matter. bandwidth does, low energy foot print does and initial investment cost does. And the simple fact the servers are the next growth market.

    In the x86 ecology there is no 3rd place and the beauty of 2nd place is that growth is achieved at the expense of 1st place.

    AMD has a real shot with Seamicro servers. The mass consumer is fickle and largely ignorant. However the IT consumer one would think is better educated regarding the product and would purchase what is the best bang for the buck.

    If that is so the AMD should grab market share as the IT consumer should understand that.

  • Report this Comment On April 09, 2013, at 2:46 PM, drborst wrote:

    rav55, do you work at AMD or just own AMD stock?

    From the comments, I see AMD as already on life support, with the ATI side of the house doing a pretty good job of tending to the patient.

    If fact, it might be a good idea to kill the AMD brand and rename the company ATI.

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