Ante Up or Wait on Intel?
Michael is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Is Intel (NASDAQ: INTC) late to the party? Why has it taken the world's largest chip maker so long to figure out that there is a shift in the way people, especially young people, use computing devices? Will its bet on Ultrabooks payoff? Good questions.
The sky is not falling, but global economic growth is slowing, or better put has slowed. According to CNNMoney, Europe is the major market for Chinese goods. So doesn't it make sense that a Europe in recession is part of the reason China's manufacturing sector has slowed? It doesn't matter whose numbers one believes, in April China teetered on the edge of of contraction and expansion. So what has this to do with microchip makers? Everything!
Intel has placed a large bet on the Ultrabook. Eventually this could very well be a winner for the company. My feeling is that an overpriced (around $1,000) product in a slowing global economy is not going to do to very well right now. So my next question is why would one buy this over the iPad or MacBook Air from Apple (NASDAQ: AAPL)? As long as Apple can continue its brilliance ARM (NASDAQ: ARMH) will reap the rewards from using its microchips like it did in the 37 million iPhones and 15.4 million iPads sold in the last three months of 2011.
I understand Intel has deep pockets but its foray into the smart phone arena is very late. This is the one segment that will continue to grow because young buyers want the phones with all the bells and whistles and will shell out the money for them. According to International Business Times the smartphone market grew by 42.5 percent year-over-year in the first quarter of 2012 while overall the global cell phone market declined by 1.5 percent.
Long term Intel should be a very good play. Its dominance in the high-margin server market can not be disputed. It will get a piece of the expected 4.4 percent worldwide increase in PC growth estimated this year by researcher Gartner. With the soft global economy I wouldn't hold my breath for the Ultrabook to land big and I would like to see how it will fair in the smartphone market. What really excites me about Intel is its projection of spending $10.1 billion on research and development. Even with that at this point I would wait before I purchased Intel.
mwm102 has no positions in the stocks mentioned above. The Motley Fool owns shares of Apple and Intel. Motley Fool newsletter services recommend Apple and Intel. 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. If you have questions about this post or the Fool’s blog network, click here for information.