On Tuesday, Intel
A 14-week quarter (instead of the usual 13), strong corporate demand, and emerging markets contributed to the strength despite several challenges. Headwinds included problems with its new Sandy Bridge processor, weak PC demand in mature markets, and the devastation in Japan.
The news seemed to erase a lot of concerns. Intel approached gains of nearly 8% in late trading and several analysts raised their price target on the stock.
Much of the discussion on the earnings call centered on datacenter demand and emerging markets. For the quarter, datacenter group revenue grew 32% while PC client group revenue grew only 17%.
Emerging markets represent more than 50% of Intel's business. Management said much of the business in these markets goes to "white box" (no-name) PC makers and therefore is not accurately counted by researchers such as Gartner and IDC. Management acknowledged demand in the U.S. and Europe is weakening thanks to both economic worries and a shift to tablets.
There's a strong case to be made that the demand shift to emerging markets will pressure Intel less than other Wintel members. Lenovo and white box PC makers present a direct challenge for established PC makers like Dell
But white box makers need basic components. That suggests component suppliers such as Intel, AMD
The shift to tablets is a lingering concern. Revenue for Intel's Atom microprocessor and chipset for mobile devices was a mere $370 million and grew only 4% year-over-year. Management sounded optimistic about potential design wins before year's end, but investors are likely to remain skeptical.
Near-term trends seem to favor Intel, but the shift to tablets is a long-term concern that shouldn't be ignored. To help you monitor this issue, The Motley Fool recently introduced a free My Watchlist feature that helps you stay ahead of the curve. To get up-to-date news and analysis on these companies, add them to your Watchlist today:
Fool contributor Cindy Johnson currently owns shares of Microsoft. Intel and Microsoft are Motley Fool Inside Value picks. The Fool owns shares of and has bought calls on Intel. Motley Fool Options has recommended a diagonal call position on Intel. Motley Fool Options has recommended a diagonal call position on Microsoft. The Fool owns shares of Microsoft, and Western Digital. Alpha Newsletter Account, LLC owns shares of Microsoft. 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.