Chip-giant Intel (NASDAQ:INTC) is set to report its fourth-quarter earnings on Thursday, Jan. 16, closing out a challenging year of transition for the company. Intel faces a continually declining PC market, a mobile market which is proving difficult to break into, and a server market which, while growing quickly, is under threat from ARM-based competition, including new ARM-convert Advanced Micro Devices (NASDAQ:AMD). Here's what to expect from Intel's earnings report.

What analysts are expecting
Analysts are not expecting much from Intel. The average revenue estimate for the quarter is $13.7 billion, up 1.8% from the same period last year. Full-year revenue is expected to decline by 1.4% to $52.6 billion, the result of a rapid decline of the PC market in favor of mobile form factors. Analysts expect earnings per share to rise by about 8% for the quarter but decline by nearly 11% for the full year.

The average analyst target price for Intel is $24.50 per share, slightly lower than the current market price. Shares of Intel have risen about 25% from the 52-week low.

Three stories playing out for Intel
The largest part of Intel's business is the PC group, responsible for processors that power traditional desktop and laptop computers. Intel expects total revenue for this group to fall by 5% in 2013 to $32.7 billion as the market for PCs continues to contract.

Even with a declining PC market, Intel has managed exceptional margins. The company expects a PC operating margin of roughly 35%, with lower costs counteracting the declining revenue. A majority of Intel's profit comes from PCs, so keeping margins high is extremely important.

Intel's PC group could see a short-term boost thanks to Microsoft ending support for Windows XP this coming April. Enterprise customers switching to Windows 7 or Windows 8 are likely buying new PCs as well, and this could give Intel's PC group temporarily higher sales. If Intel's PC group reports stronger-than-expected sales this quarter, this short-term phenomenon could be the culprit.

Intel's server business is booming as companies like Google build out massive data centers, and Intel expects to grow the server business by about 15% annually in the long term. Intel should report strong server revenue growth this quarter, with a dominant market share and little competition in the space driving results.

Later this year, competitor AMD will launch a line of ARM-based low-power server processors, directly competing with Intel's low-end Atom server processors. It's also possible that companies like Qualcomm, currently a leader in ARM-based mobile processors, could try to break into the server market. This represents a real threat to Intel's low-end server business, although the low-power nature of ARM-based chips will keep the high-end server market out of reach.

This quarter's results may give a glimpse into how well Windows 8 tablets and convertibles are selling, with Intel's Bay Trail processors powering the devices. A handful of attractively priced Windows devices from Lenovo, Dell, and HP went on sale toward the end of last year, and Microsoft had stated that its goal was to have 16 million Windows tablets sold during the holiday season.

This year will be the real test for Intel, though, with the company planning to quadruple sales of its tablet chips. Intel's Atom can run both Windows and Android, with 64-bit support coming within the next few months, and a slew of new devices have already been announced at CES. This includes a device from Asus which can switch between Windows and Android within a few seconds.

Is it time to buy Intel?
It seems that Intel has finally reached a point in its mobile business where it's competitive against the ARM-based competition, and if the company's prediction of a stabilizing PC market is correct, then Intel could return to earnings growth sooner rather than later. While this year will be a tough one in terms of profit, with heavy investments being made to spur adoption of its tablet chips, the long-term picture for Intel looks solid.

Competitor AMD, on the other hand, is having all sorts of trouble. While analysts expect AMD to swing to a small profit when it reports earnings later this month, the company's lack of focus and second-place status in every market will make it difficult to become consistently profitable. Its upcoming ARM-based servers may be its best hope in the server market, but they're far from a sure thing.

The bottom line
The specific results of this quarter are less important than the trends playing out for Intel. Its mobile business is finally taking off, with 2014 set to be a big, albeit still unprofitable, year. The PC business, while still shrinking, remains incredibly profitable, and the server business is growing at double-digit rates. The line between PC and mobile devices is blurring, and Intel aims to put its chips into anything and everything.

3 investments you should own, forever
As every savvy investor knows, Warren Buffett didn't make billions by betting on half-baked stocks. He isolated his best few ideas, bet big, and rode them to riches, hardly ever selling. You deserve the same. That's why our CEO, legendary investor Tom Gardner, has permitted us to reveal The Motley Fool's 3 Stocks to Own Forever. These picks are free today! Just click here now to uncover the three companies we love. 

Timothy Green has no position in any stocks mentioned. The Motley Fool recommends Intel. The Motley Fool owns shares of Intel. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.