3 Important Storylines in Intel Earnings

Investors already knew that Intel's (NASDAQ: INTC  ) earnings weren't going to be stellar. The 14% plunge of global PC units in the first quarter made sure of that. The headline figures were mostly in line with expectations, with a marginal top-line beat. However, there were three important storylines in the earnings release that investors should instead focus on.

1. No CEO clarity
Intel's next CEO is perhaps the most important decision in a decade for Chipzilla, following Paul Otellini's planned retirement next month. Shareholders hoping for some clarity on the succession plans were left empty-handed, as the company merely said that the "selection process is on track" and that the board is still planning to make an announcement at the shareholder meeting next month.

Beyond that, all remains quiet on the CEO front. In this case, no news is bad news.

2. Still no mobile
The company continues attempting to tap mobile growth, but has little to show for it. Quite the contrary: Intel's other architecture group that includes smartphone and tablet chips shrank by 9% to $978 million. That represents just 8% of total revenue, compared to the 64% of sales that the PC client group still accounts for.

It's now been over a year since the Medfield Atom chip launched, and there's a notable lack of meaningful design wins for the processor. There have been a handful of spots, but no high-profile scores to speak of. The subsequent Clover Trail Atom chips are primarily found in Microsoft Windows 8 tablets, and we all know those aren't selling particularly well.

3. A billion saved is a billion earned
Intel decided to shave $1 billion off of its 2013 capital expenditure budget, and now expects to spend approximately $12 billion, plus or minus $500 million. That's down from the previous outlook of $13 billion, with the same amount of wiggle room. That's definitely the right call to make, since investors had previously questioned the decision to boost spending amid slow PC sales.

Intel's factory utilization has also been below normal levels, hovering around 60%. With excess capacity at manufacturing facilities, it makes sense to trim the budget. Growing the foundry business could put those factories to work, but Intel is proceeding very cautiously there, starting with the Altera partnership.

Overall, investors were still pleased with the results; shares gained after hours following the release. The biggest unknown remains how the CEO succession is proceeding. Investors need to mark their calendars for May 16 to get clarity on who will lead the chip giant from here on out.

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.


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