Intel Corporation Earnings: Will the PC Really Save the Chipmaker?

Surprising good news from a long-declining sector could boost results this quarter.

Jul 12, 2014 at 3:06PM

On Tuesday, Intel (NASDAQ:INTC) will release its quarterly report, and shareholders have to be excited about the strong performance in the chip giant's stock lately. Even as long-term investors have bemoaned Intel's strategic lapse in falling behind competitors Qualcomm (NASDAQ:QCOM) and NVIDIA (NASDAQ:NVDA) in tapping the full power of the mobile revolution, Intel appears to be getting support from an area that most investors had given hope on entirely: the PC realm.

Intel pioneered the semiconductor industry, with its microprocessors forming the foundation of the PC boom of the 1980s and 1990s. More recently, though, the rise of smartphones, tablets, and other mobile devices has forced Intel to make a major strategic shift, and its sluggishness in adapting to the new environment gave Qualcomm, NVIDIA, and other nimbler competitors the opening they needed to chip away at Intel's dominance. Despite a recent bump in PC demand, Intel still has to figure out how to move forward in a viable strategic direction for the long run. Let's take an early look at what's been happening with Intel over the past quarter and what we're likely to see in its report.

Intc Chip
Source: Intel.

Stats on Intel

Analyst EPS Estimate

$0.52

Change From Year-Ago EPS

33%

Revenue Estimate

$13.69 billion

Change From Year-Ago Revenue

6.8%

Earnings Beats in Past 4 Quarters

2

Source: Yahoo! Finance.

Are Intel earnings exploding higher?
In recent months, investors have become much more enthusiastic about Intel earnings, boosting second-quarter estimates by $0.09 per share and full-year projections by almost double that amount. The stock has soared in response, gaining 17% just since early April.

Intc

Source: Intel.

Intel's first-quarter results showed the general trend the chipmaker had fallen into recently. Revenue fell 1.5% from year-ago levels, sending earnings per share down 5%. Pockets of strength helped Intel's overall results, including gains in its data-center group. But steady weakness in its PC business continued to weigh on Intel's overall results, with PC-Client revenue easing downward by 1%.

The big positive surprise for Intel shareholders came in June, when Intel announced it was raising its revenue guidance for the second quarter and for the full year. In the release, Intel cited strong growth in PC systems for enterprise customers, and that was enough for it to expect 5% higher sales for the second quarter and to call for at least some growth for the full year compared to original guidance for roughly unchanged sales. Many believe that the removal of customer support for the older Windows XP operating system might have spurred business customers to replace aging PCs with newer models, leading to the short-term bump in the division.

But many worry that the PC recovery could be short-lived, and when it comes to the area with the most promising long-term prospects for its growth, Intel has continued to struggle in the mobile arena. During the first quarter, Intel suffered operating losses of more than $925 million in its mobile and communications division, with net revenue plunging more than 60% from the year-ago quarter's levels. Despite Intel's predictions that the company would rebound sharply in the mobile space in 2013, many now expect that Intel won't see marked progress in mobile until next year at the earliest, as the first-mover advantages that Qualcomm has continue to hamper Intel's efforts to establish stronger market share.

In the long run, Intel will rely on new chip offerings in order to move forward. Its new Cherry Trail architecture has the potential to move well past older offerings, with applications both for low-power PCs and tablets. That could help its graphics performance be more comparable to offerings from NVIDIA and Qualcomm, finally closing a competitive gap that has held back Intel.

In the Intel earnings report, watch to see how large the bump in PC demand has been and what the company foresees as its long-term impact. Without ongoing progress in its mobile efforts, Intel's earnings outlook won't necessarily stay rosy for long.

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

Click here to add Intel to My Watchlist, which can find all of our Foolish analysis on it and all your other stocks.

Dan Caplinger owns shares of Apple. The Motley Fool recommends Apple, Intel, and NVIDIA and owns shares of Intel, Apple, and Qualcomm. Try any of our Foolish newsletter services free for 30 days. We Fools don't 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