Chip manufacturer Intel (NASDAQ:INTC) seems to be developing an uncanny ability to make investors jittery about its future prospects. The company's recently released third quarter earnings figures sent out mixed signals as net income at $0.58 per share managed to beat analyst expectations, but revenue at $13.48 billion stayed more or less flat on a year-over-year basis. However, what really pulled down Intel's stock price was its revenue guidance of $13.7 billion for the current quarter that fell short of Street estimates .

Intel's problem is that it still derives more than 80% of its overall revenue from making chips for personal computers . However, a recent report from research firm IDC reveals a 7.6% fall in worldwide PC shipments, the sixth straight quarterly decline for what is largely considered to be a sunset industry . As a natural outcome, Intel's third quarter PC chip division sales also fell 3.5% from the year-ago period .

So, is Intel still worthy of remaining a part of your tech portfolio? As we delve a little deeper into the whole scenario, it seems most of the positives for Intel have conditions attached to them.

The state of the PC industry
For starters, things may not be as bad as perceived for the PC industry. For instance, the latest IDC quarterly data reveals global PC shipments fell 7.6% instead of its earlier prediction of a 9.5% decline. This may have been driven by companies upgrading their PC operating systems as support for Windows XP is officially terminated next year. But, IDC has also warned about a high probability of global PC shipments undergoing another round of decline in 2014, indicating the bad times are set to continue even further .

Server chip division sales
The only saving grace for Intel in an otherwise lukewarm earnings report has been a 12% increase in sales for its server chip division, fueled by increased demand from companies like Facebook and Amazon that depend on huge data centers for their operations . However, while server chips certainly tend to be more profitable than PC chips, they do not match up to the latter category in terms of volume sales.

A new generation of processors
Any talk of Intel these days is incomplete without a mention of its new line of PC-based processors code-named Haswell that promise optimal performance while consuming minimal battery life. In fact, Intel's Haswell chips are set to power Google Chromebook models to be launched during the upcoming holiday season that are also said to be less costly than conventional ones .

The only catch – PC shipments have continued to remain weak in the traditionally strong third quarter when back-to-school buying tends to boost sales, according to Gartner . To add to it, Haswell's successor Broadwell has already been subjected to an unscheduled three-month production delay due to technical glitches in Intel's much-touted 14-nanometer production line .

Intel hopes to counter these setbacks through its newly developed Bay Trail line of mobile device processors that should surface in tablets to be marketed during the holiday season. Unfortunately, Apple's upcoming iPads may spoil that party.

The competitive scenario: Taiwan Semiconductor and Qualcomm
Intel's competitors, on the other hand, seem to be doing well. Fellow chip manufacturer TSMC or Taiwan Semiconductor Manufacturing Company Limited's (NYSE:TSM) massive investments in its newest 20-nanometer production line seem to be well justified already . Currently the planet's largest contract chip manufacturer, TSMC recently posted record third-quarter net profits that exceeded analyst expectations on the back of increased demand for smartphone-based chips .

One of TSMC's biggest clients is Qualcomm (NASDAQ:QCOM), the undisputed leader in the production of chips for mobile devices, an area where Intel is still trying to gain a foothold. According to a recent report from Strategy Analytics, Qualcomm continues to dominate the global smartphone chip market with a 53% share of the total revenue and boasts of a wide range of customers including Samsung, Sony, HTC, and LG Electronics . Qualcomm's primary strength lies in the manufacture of LTE baseband chips, an area where it enjoys near total domination with around 97% share of global LTE based revenue .

Some Foolish parting thoughts
Two important things about Intel have emerged from the latest reported results. One, the company's forecast for gross margins seems to be in sync with analyst estimates , which is significant because low-end chips meant for low-cost devices such as tablets may create margin pressure.

Second, management continues to be much more realistic than before, slashing capital expenditure targets to adapt to slowing demand. At the same time, that should lead to increased dividend payout, something which has not happened as yet.

On the whole, the biggest disappointment about Intel seems to be its continued inability to discover a secure alternate stream of revenue generation, which makes it overtly reliant on the fast-fading PC industry. I would recommend keeping a very close watch on this company's developments over the next couple of quarters and if things do not seem to be working out in the right direction, it may be time to make a drastic decision on Intel.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.