After an anonymous source recently told CNET that Intel (NASDAQ: INTC ) has started shipping early versions of its new Haswell chip to customers in preparation for a June 2013 release, no one would blame you for being skeptical. But the CNET rumor coincides with earlier reports of Intel's next-great-thing hitting the streets in June, and Intel's Developer Forum kicks off April10, which would be an ideal setting for a big announcement, wouldn't it? For shareholders nervously awaiting its April 16 earnings release, positive Haswell news would be welcome indeed.
What's the big deal?
Even as the S&P 500 flirts with new highs and boasts a nearly 9% return year to date and 11% in the past year, Intel shareholders are stuck lamenting its poor performance. Compared to the S&P, its stock is downright pitiful: up just 1.25% for 2013 and down more than 25% for the past year. Ouch.
Outgoing Intel CEO Paul Otellini shoulders much of the blame. Intel was late to the cloud and mobile computing parties, and the ever-declining PC market has investors spooked. But the company's data center revenues continue to grow and are key to its cloud computing growth. Its foray into the smartphone market is under way with its made-for-mobile Atom processor, a solid foundation to build on (hopefully!). And now, news that Haswell will hit the shelves in June should be music to the ears of investors.
In addition to speed, the new Haswell chip is said to be an improvement in several key aspects of mobile computing. According to Intel, it will give users a richer graphical experience without sacrificing performance. Mobile devices' abilities to stream videos, play 3-D games, and share pictures are limited by today's processors. Haswell aims to change all that.
Another key advantage: It's powerful enough to give tablets the abilities of full-fledged PCs. Mobile computing's well and good, but not everyone can, or wants to, work from the local coffee shop. Perhaps its most impressive feature is that, according to Intel and various rumors, it accomplishes all of the above and still provides improved energy efficiency over existing alternatives. Short battery life is the bane of mobile users, not just gamers and streaming-movie buffs.
Intel's hardly alone in mobile processing. Based on market cap, rival chip designer and developer of intellectual property and related software ARM Holdings (NASDAQ: ARMH ) is small compared to Intel -- about $19 billion vs. Intel's $103 billion -- but has a strong mobile presence, particularly in the smartphone market. With 90% of the smartphone market running an ARM licensed processor, ARM holds an enviable 31% share of the mobile computing world. But even with a jump-start, ARM doesn't provide the same stock appreciation potential as Intel. It's trading at sky-high multiples, with a trailing P/E of 76 and forward P/E of 35. Intel, by comparison, has a forward P/E of 10 and pays a 4.3% dividend yield compared to ARM's paltry 0.53%.
Another big challenge for Intel in conquering the mobile computing market was demonstrated by Google's decision to swap out its NVIDIA processor in favor of Qualcomm's (NASDAQ: QCOM ) popular Snapdragon chip for its upcoming second-generation Nexus tablet. NVIDIA's Tegra 3 chip wasn't fast enough for Google, according to the rumors, so Qualcomm got the nod. Much of Qualcomm's impressive mobile market share -- 50% of the smartphone market and 86% of the LTE business -- uses ARM's architecture.
And there's a lot at stake for Intel and its competitors in mobile computing. According to research firm IDC, tablet sales grew more than 78% in 2012 compared to the prior year, and are expected to surpass desktop PC sales for the first time ever in 2013. With potential like that, it's not hard to see why Intel has to get Haswell into the hands of device makers ASAP.
The competition is fierce for Intel as it continues its transition to mobile computing. The new Atom processors expected by year-end will help, but Haswell is where the rubber meets the road. If you're a long-term investor, as many Fools are, exercise some patience, enjoy a 4.3% dividend, and get on board Intel. The best is yet to come.
When it comes to dominating markets, it doesn't get much better than Intel's position in the PC microprocessor arena. But that market's maturing, and Intel finds itself in a precarious situation longer term if it doesn't find growth in the mobile and cloud computing markets. 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.