Why This Week Is Critical for Intel

Intel reports fourth-quarter and full-year earnings on January 16. Here's what investors should look for in its report.

Jan 15, 2014 at 1:00PM

It's a big week for chipmaker Intel (NASDAQ:INTC), which desperately needs to prove that it can buck the trend of declining personal computer sales. Intel struggled mightily throughout most of 2013 due to the well-publicized decline of the PC. Intel has yet to demonstrate that it can get its chips into smartphones and tablets.

Since Intel's chips are utilized in roughly four out of five PC processors, investors are understandably concerned that the company's chips may be a modern-day buggy whip. With so many dark clouds hanging over its industry, here's what you need to watch for when Intel reports earnings on Thursday after the close. 

Can revenue stay afloat?
A recurring theme throughout technology earnings in 2013 was earnings growth driven primarily by cost cuts and share buybacks. Meanwhile, a few technology giants haven't produced revenue growth. This is troubling, since the overall global economy has steadily recovered since the financial crisis. 

For example, other companies reliant on the PC for profits fell on hard times last year. Hewlett-Packard (NYSE:HPQ) saw its revenue drop 7% in 2013. Not surprisingly, its personal systems segment was a major culprit. Revenue in that division fell 2% in 2013, with consumer segment revenue dropping 10%. This is entirely reflective of the current environment, which is a tough one for the PC.

Clearly, the soaring popularity of tablets, smartphones, and other mobile devices has come at the direct expense of traditional desktops and laptops. There's now credible evidence to back that up. Industry research firm Gartner reported that worldwide PC shipments fell nearly 7% in the fourth quarter. That represented the seventh quarter in a row of declining PC shipments. In all, the global PC market suffered its worst decline ever in 2013.

Why other hardware companies are switching focus
One technology giant that saw the writing on the wall long ago is International Business Machines (NYSE:IBM). IBM was once a major player in personal computer hardware, but those days are long gone. IBM restructured itself to become a software and technology consulting business, and more recently, a major player in cloud-based solutions.

IBM intends to generate half its profits from its software operating division by 2015, and has made measurable progress in this regard. IBM increased its cloud-based revenue by 70% in the third quarter.

Meanwhile, Intel hasn't yet been able to break free from the shackles of the PC. After its third-quarter, Intel pointed out that it has more than 40 products introduced for ultra-mobile devices, networking, storage, and server market segments. However, Intel isn't seeing this show up in its business results to this point.

Revenue and earnings per share were both lower through the first nine months of 2013, as opposed to the same period last year. In addition, it has set fairly tepid expectations for the fourth quarter. Intel expects $13.7 billion in revenue, plus or minus $500 million. If it hits its target, revenue would increase only marginally versus the fourth quarter of 2012.

What to look for when Intel reports
Intel had more than its fair share of struggles last year, and yet, its stock price surged as 2013 drew to a close. Clearly, there's an overarching sense of optimism that Intel's business, and the PC market in general, is near a bottom. Intel will have to prove as much in its fourth-quarter report to keep the momentum going.

Of the major issues critical to the company, you should keep an eye out for measurable progress on the smartphone front. If Intel can manage any sort of mobile market penetration, revenue should head in the right direction and so will the stock. 

Here are the two words Bill Gates doesn't want you to hear...
There are few things that Bill Gates fears. Cloud computing is one of them. It’s a radical shift in technology that has early investors getting filthy rich, and we want you to join them. That’s why we are highlighting three companies that could make investors like you rich. You've likely only heard of one of them, so be sure to click here to watch this shocking video presentation!

Bob Ciura owns shares of Intel. The Motley Fool recommends Intel. The Motley Fool owns shares of Intel and International Business Machines. 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.

Money to your ears - A great FREE investing resource for you

The best way to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as “binge-worthy finance.”

Feb 1, 2016 at 5:03PM

Whether we're in the midst of earnings season or riding out the market's lulls, you want to know the best strategies for your money.

And you'll want to go beyond the hype of screaming TV personalities, fear-mongering ads, and "analysis" from people who might have your email address ... but no track record of success.

In short, you want a voice of reason you can count on.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich," rated The Motley Fool as the #1 place online to get smarter about investing.

And one of the easiest, most enjoyable, most valuable ways to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as "binge-worthy finance."

Whether you make it part of your daily commute or you save up and listen to a handful of episodes for your 50-mile bike rides or long soaks in a bubble bath (or both!), the podcasts make sense of your money.

And unlike so many who want to make the subjects of personal finance and investing complicated and scary, our podcasts are clear, insightful, and (yes, it's true) fun.

Our free suite of podcasts

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. The show is also heard weekly on dozens of radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable. Rule Breaker Investing and Answers are timeless, so it's worth going back to and listening from the very start; the other three are focused more on today's events, so listen to the most recent first.

All are available for free at www.fool.com/podcasts.

If you're looking for a friendly voice ... with great advice on how to make the most of your money ... from a business with a lengthy track record of success ... in clear, compelling language ... I encourage you to give a listen to our free podcasts.

Head to www.fool.com/podcasts, give them a spin, and you can subscribe there (at iTunes, Stitcher, or our other partners) if you want to receive them regularly.

It's money to your ears.


Compare Brokers