Intel (INTC +2.41%) is pulling the Dow Jones Industrial Average (^DJI 0.95%) higher today. The chip titan's stock jumped as much as 4.8% higher over the weekend and remains the second-biggest Dow gainer in the early afternoon.
When Intel stock makes a big move, it's typically followed by longtime systems-architect partner Microsoft (MSFT 1.54%), but that's not the case today. Mr. Softy is outperforming the Dow today, but not by much. This time, Intel is leaving Redmond in the dust.
That's because Intel's catalysts don't really include Microsoft this time. It's not a glowing report on PC or server markets, nor a sales-boosting new WinTel system or product line, which used to be the typical driver of both stocks. Intel did present a brand-new desktop chip over the weekend -- a reworked version of the portable Haswell design -- but nobody expects these chips to jump-start stalled sales of Microsoft Windows 8 systems.
Instead, mobile-leader Samsung just introduced a new tablet with Intel chips inside -- and no trace of Windows software in sight. The Galaxy Note 3 tablet will run Google's (GOOG 0.68%) Android system, like earlier installments in the Samsung Galaxy series. This is Intel's first design win in a major mobile product, outside of a few not-so-relevant smartphones and tablets made by Chinese vendors for the Chinese market.
If Samsung's Galaxy Note 2 is any indication, the Note 3 will indeed be a big seller. The Note 2 moved 5 million units in its first two months on the market, and those are huge numbers for an individual Android product. Google and manufacturing partner ASUS could hardly make enough Nexus 7 tablets to meet demand in 2012 and ended up with about 5 million units sold. Android tablets match Apple's (AAPL 1.29%) market-leading iPad blow for blow these days, though mostly through strength in numbers.
Landing the contract for one of the hottest products in the tablet space is a nice start, but more importantly it could signal the start of Intel's entry into the smartphone space. That's still where the real mobile volume is. iPads may be Apple's hottest growth product, but iPhones still outsell the tablet by a nearly 2-to-1 ratio. And while Android tablets are catching up to the iPad, Google's little green robots have crushed Apple's phones in terms of market share for years. For a component supplier like Intel, volume matters far more than high retail margins on the final product.
That's why this tablet is such a big deal for Intel. The company has been part of Google's Android project from the start, but it never had the combination of low-power and high-performance mobile chips it takes to catch the eye of device designers. Samsung just started changing that trend.
I bought Intel shares myself when investors and analysts started worrying far too much about the "death of the PC," sending Intel stock to the bargain basement. The wily tech-sector veteran is finding ways to make up for that soft market via servers and mobile gadgets, so the low cost and astronomical dividend yield on this Dow stock are just too mouth-watering to pass up.
