Intel Corporation's Turnaround Looks Realistic: Here's Why

Intel (NASDAQ: INTC  ) has seen some tough times as the PC market contracts. The chip giant's profit in the first quarter was down and its revenue missed estimates. However, the company beat expectations and its revenue outlook was also decent. With the PC market's decline nearing a bottom and Intel making a push into tablets, better times might be ahead. But can the company fare well in the mobile market in the face of Qualcomm's (NASDAQ: QCOM  ) dominance?

Slow start in mobile
Intel has struggled in its mobile and communications business, through which it sells processors for smartphones and tablets. Revenue from this segment declined 61% year over year in the first quarter as the company transitions from 2G and 3G solutions to LTE.

Intel struggles are due to its late start in mobile. In comparison, competitor Qualcomm receives 3% to 5% on every 3G and 4G LTE handset sold anywhere in the world, according to Check Capital. Intel, on the other hand, has yet to make a substantive dent in this market. And Qualcomm is trying to strengthen its position further: In December, Qualcomm launched the Snapdragon 410 processor with integrated 4G LTE. 

The Snapdragon 410 is equipped with multiband and multimode support and is 64-bit capable. It is capable of working on all major modes and frequency bands across the globe, while also supporting dual and triple SIM phones. This chip is targeted at the low-cost smartphone market, and could help Qualcomm extend its lead in mobile processors.

Trying to get better
However, Intel is making a few moves of its own. It has kicked off its integrated solution with SoFIA, its first-ever integrated apps processor and baseband that is scheduled to be released by the end of the year. Intel plans to ship the 3G solution to OEMs in the fourth quarter, and to follow it up with an LTE version in the first half of 2015. 

Intel also has landed design wins in tablets and is ramping up volumes aggressively. As a result, it expects a jump in revenue in the second half of the year thanks to its 7160 mobile modem. It has already placed the chip inside well-known devices such as the Samsung Galaxy Note 3 Neo, Samsung Galaxy Tab 3, and the Asus Fonepad 7.

Intel shipped 5 million tablet processors in the first quarter and believes that it is on track to hit its goal of shipping 40 million tablet systems-on-a-chip for 2014. Management said the company has more than 90 designs on Android and Windows platforms. So Intel can see an improvement in its mobile business this year. 

In addition, Intel is starting to deploy its Cat 6 LTE solution, the 7260, with carrier aggregation. This is a successor to the 7160 and might see good sales via use by module vendors such as Huawei, Sierra Wireless, Samsung, Asus, Lenovo, and Dell. 

Some PC goodness is expected
In addition, Intel expects the PC market to stabilize, providing unit growth going forward. Intel is trying to boost PC sales and is focusing on reinventing computing by delivering new form factors, innovation, and longer battery life. 

The company is targeting the back to school season through two-in-one PCs, which will be priced at $699 or less. Intel cites renewed interest in Windows 8, which could be a key driver for the company.

Alongside this, Intel is ramping up more than 130 Atom micro-architecture notebook and desktop designs with its Bay Trail platform. This move should increase its presence in the value segment. Intel is seeing traction in small form factors and all-in one computing of late, and it is looking to tap the market with more designs.

The takeaway
Intel's outlook indicates the company could be turning around and tasting some success with its recent product development moves. The company projects revenue of $13 billion in the second quarter, slightly higher than the consensus estimate. With new solutions to address the mobile market and an expected stabilization of the PCs, Intel is on a path of improvement. As the company has a handsome 3.4% dividend yield, it might be worth waiting for a turnaround at Intel.

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8/28/2015 4:00 PM
INTC $28.42 Up +0.70 +2.53%
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Qualcomm CAPS Rating: ****