Has Anything Really Changed for Intel Corporation?

Raising guidance gave the chipmaker's stock a shot in the arm recently, but the same challenges remain.

Jun 16, 2014 at 3:00PM

By now you've likely heard the good news regarding Intel's (NASDAQ:INTC) recently announced, upbeat revenue guidance for Q2 of 2014. We'll know whether the positive signs come to fruition when Intel reports its Q2 on July 15. The upwardly revised forecast has been a boon for Intel shareholders, providing the impetus for a new, 52-week high stock price of over $30 a share. Intel's share price was up nearly 7% the day following the revision.

Though Intel shares haven't performed poorly year-to-date -- its share price is up over 15%, counting the recent pop -- you didn't have to look far to find industry pundits lamenting the chip giant's glacier-slow transformation to high-growth markets like mobile. Alas, Intel's improved outlook wasn't because of strides made in supplying chips for tablets, laptops, or smartphones, it was its old mainstay: PCs. A surprise? You bet, and worthy of some all-around good cheer, but does it substantially change anything relating to Intel's future? Or is industry leading Qualcomm (NASDAQ:QCOM) still problem No. 1?

Like an old friend
The continual decline in the PC market, Intel's bread-and-butter for decades, is nothing new. As consumers shift from desktop devices to laptops and tablets, manufacturers reliant on PCs like Intel have paid the price. It's no wonder Brian Krzanich's first order of business when he was named Chief Executive Officer was to tell anyone who would listen that Intel needed to shift away from PCs to mobile devices.

The doom-and-gloom surrounding PCs is what made Intel's upwardly revised guidance for this quarter such a pleasant surprise. According to Intel, "stronger than expected demand for business PCs," will result in approximately $13.7 billion in revenue this quarter, up from earlier expectations of about $13 billion. That's a significant change, and it's easy to see why investors celebrated.

Strong business PC sales should also translate to overall revenue growth for 2014, Intel said, and gross margins should finish up near the high end of its earlier forecasted 61% range. Again, positive news at a time when Intel could use a little. But there's another perspective, too. Increased revenue guidance based on better-than-expected PC sales instead of improved mobile chip sales? That sounds suspiciously close to the old Intel.

Great, but so what?
Growth in business PC sales, as nice as it is for Intel shareholders in the near-term, doesn't mean much for its future. While PC sales may prove to be a bit stronger than some thought, it will always be an industry with little, to no, overall growth potential. Higher than expected sales, doesn't mean higher than last quarter, or last year, certainly as the overall PC market is concerned. This year's Q1 marked the eight straight decline in PC sales. Bottoming out, maybe, but that's about it.

So, that brings us to Intel's mobile efforts, something Krzanich called "critical" to Intel's long-term success. Granted, chip manufacturers, even behemoths like Intel famous for its chip development processes and relatively rapid turnaround, can't arm themselves with mobile chip solutions overnight.

With Krzanich firmly behind Intel's full steam ahead shift to mobile, it's not overly optimistic to expect it to have made some headway by now. Keep in mind, Intel is relatively new to the mobile game, but not brand new. Sure, it's a long road ahead to catch Qualcomm, which owned a whopping 64% of the mobile processor market in 2013. And investors should not expect Intel to make huge inroads on Qualcomm's turf, but chipping away at some of that 64% isn't too much to ask. But it's not happening. In Q1 of this year, Intel mobile chip sales dropped 61%.

Final Foolish thoughts
Not all is lost for Intel, by any stretch. Intel's data center group continues to show steady, quarterly revenue improvement, jumping 11% year-over-year last quarter. With so much upside in the cloud computing and data hosting markets, Intel's data center division could prove to be an on-going bright spot. And Intel isn't without smartphone and tablet customers of its own, despite Qualcomm's commanding market position.

But when push comes to shove, Intel must begin gaining market share in mobile. A stabilizing, if not spectacular, PC market is well and good, and Intel is clearly poised to continue dominating. But for investors, the future is about growth, not maintaining the status quo. Business PC sales are slightly better than expected. Great, now Intel needs to get back to focusing on the task at hand.

Leaked: Apple's next smart device (warning, it may shock you)
Apple recently recruited a secret-development "dream team" to guarantee its newest smart device was kept hidden from the public for as long as possible. But the secret is out, and some early viewers are claiming its everyday impact could trump the iPod, iPhone, and the iPad. In fact, ABI Research predicts 485 million of this type of device will be sold per year. But one small company makes Apple's gadget possible. And its stock price has nearly unlimited room to run for early in-the-know investors. To be one of them, and see Apple's newest smart gizmo, just click here!

Tim Brugger has no position in any stocks mentioned. The Motley Fool recommends Intel. The Motley Fool owns shares of Intel and Qualcomm. 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.

1 Key Step to Get Rich

Our mission at The Motley Fool is to help the world invest better. Whether that’s helping people overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we can help.

Feb 1, 2016 at 4:54PM

To be perfectly clear, this is not a get-rich action that my Foolish colleagues and I came up with. But we wouldn't argue with the approach.

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.

"The Motley Fool aims to build a strong investment community, which it does by providing a variety of resources: the website, books, a newspaper column, a radio [show], and [newsletters]," wrote (the clearly insightful and talented) money reporter Kathleen Elkins. "This site has something for every type of investor, from basic lessons for beginners to investing commentary on mutual funds, stock sectors, and value for the more advanced."

Our mission at The Motley Fool is to help the world invest better, so it's nice to receive that kind of recognition. It lets us know we're doing our job.

Whether that's helping the entirely uninitiated overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we want to provide our readers with a boost to the next step on their journey to financial independence.

Articles and beyond

As Business Insider wrote, there are a number of resources available from the Fool for investors of all levels and styles.

In addition to the dozens of free articles we publish every day on our website, I want to highlight two must-see spots in your tour of fool.com.

For the beginning investor

Investing can seem like a Big Deal to those who have yet to buy their first stock. Many investment professionals try to infuse the conversation with jargon in order to deter individual investors from tackling it on their own (and to justify their often sky-high fees).

But the individual investor can beat the market. The real secret to investing is that it doesn't take tons of money, endless hours, or super-secret formulas that only experts possess.

That's why we created a best-selling guide that walks investors-to-be through everything they need to know to get started. And because we're so dedicated to our mission, we've made that available for free.

If you're just starting out (or want to help out someone who is), go to www.fool.com/beginners, drop in your email address, and you'll be able to instantly access the quick-read guide ... for free.

For the listener

Whether it's on the stationary exercise bike or during my daily commute, I spend a lot of time going nowhere. But I've found a way to make that time benefit me.

The Motley Fool offers five podcasts that I refer to as "binge-worthy financial information."

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. It's also featured on several dozen 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 ... and I don't say that simply because the hosts all sit within a Nerf-gun shot of my desk. Rule Breaker Investing and Answers contain timeless advice, so you might want to go back to the beginning with those. The other three take their cues from the market, so you'll want to listen to the most recent first. All are available at www.fool.com/podcasts.

But wait, there's more

The book and the podcasts – both free ... both awesome – also come with an ongoing benefit. If you download the book, or if you enter your email address in the magical box at the podcasts page, you'll get ongoing market coverage sent straight to your inbox.

Investor Insights is valuable and enjoyable coverage of everything from macroeconomic events to investing strategies to our analyst's travels around the world to find the next big thing. Also free.

Get the book. Listen to a podcast. Sign up for Investor Insights. I'm not saying that any of those things will make you rich ... but Business Insider seems to think so.


Compare Brokers