In a recent interview, Intel (NASDAQ: INTC ) Director of Marketing and Market Development Sandeep Aurora revealed something pretty interesting. When asked about how the company planned to leverage its considerable brand to gain traction in the smartphone and tablet markets, Aurora had this to say:
You will see one or two large brands coming with phones with Intel inside in 2014. We are sure 2014 will be a turnaround year for us.
Who could these customers be?
The two names that immediately come to mind are Motorola, via Google (NASDAQ: GOOGL ) , and Samsung (NASDAQOTH: SSNLF ) . Right off the bat, investors already know that Samsung will be coming to market with at least one Intel-based phone next year, which, unsurprisingly, will be the first commercial Tizen handset. Further, since Motorola/Google was rather public about a multi-year, multi-device strategic partnership with Intel, it only stands to reason that when Intel's newer, more competitive chips roll out, they'll find homes in at least a few of Motorola's products.
Intel also has a pretty long history of winning designs at Lenovo (NASDAQOTH: LNVGY ) . For example, the Lenovo K800 and K900 -- the latter of which was a "top 5" seller in China in its heyday -- sported Intel's Medfield and Clover Trail+ silicon, respectively. Given that Intel's next-generation chips should be quite a bit more competitive at launch than the previous silicon was, it wouldn't be a surprise to see Lenovo put out a phone with Intel silicon -- although if Lenovo is one of the "big" players mentioned, then this would rule out Motorola/Google.
The investment implications
The real question at this point is just what the investment implication is going to be from these wins. Frankly, Intel is a company with roughly $53 billion in annual revenue, so even if Intel manages to sell 10 million phones with $20 worth of silicon content, it's just not going to move the needle from a top/bottom-line perspective. What any potential wins would signal, however, is that the company continues to make meaningful progress in this space. This builds credibility with investors, and makes it easier to believe any future promises made.
In 2014, Merrifield and its mid-life kicker, Moorefield -- which is likely to double Merrifield's performance) -- will probably come close to or push ahead of what Qualcomm's chips are doing on a number of key metrics. But they probably won't be lights-out, game-changing parts. That, if Intel's management was serious at its recent analyst day, should be the 2015 part known as Broxton. If that chip delivers, then the entire mobile investment landscape could be turned on its ear. Of course, the competition isn't sitting still, but Intel should have a nice lead thanks to massive research and development spending in mobile.
Foolish bottom line
Investing in Intel isn't about short-term gain, but if the long-term strategic vision plays out over the next 2-3 years, then there's plenty of long-term gain to be had. Intel has the R&D might and manufacturing muscle to really win in this space, but it has to get decisively leadership products out to prove itself to its customers. While 2014 will see the beginnings of "real" phones with Intel parts, the 2015 story is what investors should be looking toward.
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