A Big Win for This Chipmaker
Reuben is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Intel (NASDAQ: INTC) has scored a big chip win from Samsung. This could be the catalyst that Intel's shares, and business, needed to head higher.
A 10” Galaxy
Samsung recently announced plans for upgraded versions of its eight and ten-inch Galaxy tablet computer. The Galaxy line of products is based on Google's Android operating system and has been a massive success for Samsung. In fact, the Galaxy line of phones and tablets are the only real competitors to Apple's (NASDAQ: AAPL) iPhone and iPad products.
According to All Things D, Intel's “Atom chip using the Clovertrail+ architecture” will power the ten-inch Galaxy. This is a huge win for Intel.
Missing the boat
Intel missed the mobile boat. It continued to focus on its bread and butter personal computer (PC) and server chips even though consumers were moving toward mobile devices. To be fair, PCs and servers are far from dead. In fact, every mobile device interacts with a computer when it connects to the Internet.
Not having a mobile presence, however, left a big hole in Intel's product portfolio. It also led to big questions about the chip giant's growth prospects.
Playing catch up
Intel's massive size and financial strength, however, left it with plenty of firepower to play catch up. To that end, it has been working with Google to create chips specifically designed to support Android-based devices. However, it hadn't scored a big win until the ten-inch Galaxy tablet.
The market has been increasingly pleased with the progress at Intel, boosting the stock from around $20 a share six months ago to around $25 recently. The Galaxy news, understandably, led to a big one-day jump. Intel, however, hasn't broken out of the range it's been in for about a decade, so, there's still time for investors to jump aboard.
With a yield of around 3.70% and a long history of dividend increases, income investors should like what they see here. However, if the company can find another big customer in the mobile space, growth investors might want to take a closer look, too.
An Apple of a deal?
Samsung and Apple are the two big competitors in the phone and tablet world, which makes them Intel's prime customer targets. With a toe in the door at Samsung, there could be more business here if Intel's chip performs well. Despite positive rumors, Apple is likely to be a tougher sell.
Apple likes to control every aspect of its products. Intel, meanwhile, both makes and designs chips. It isn't used to being a chip foundry. So, the two may never be able to come to terms. Of course, Apple's focus on control is one of the reasons why its shares have traded down from their high-water mark of around $700 a share.
Indeed, investors have started to realize that the company is a device maker and needs to keep selling more and more tech gadgets to keep sales headed higher. New customers or new tech toys are the only way to do that. That said, the company's top line continues to head higher at an impressive pace and has done so for more than a decade.
A new dividend and plans to buy back shares using debt have changed the company's makeup. But with a yield of around 2.70%, it might actually be a good option for growth and income investors that believe Apple can continue to wow customers.
Microsoft (NASDAQ: MSFT) might actually be a better customer target. The OS giant also missed out on the mobile shift and has been playing catch up. However, Intel and Microsoft have a long history of working well together. Part of Microsoft's growth plan is to make its various operating systems look and feel similar. Another part is to start making some of its own devices.
For example, Microsoft is making its own tablet, called the Surface. While it partners with others on phones, like Nokia, if Intel can get a foot in the door with Microsoft and its Windows Mobile OS, it could start to see more wins. The deals might not come from the industry leaders, but that doesn't mean it won't add up to a real business.
Microsoft, for its part, has seen its shares rise as it pushes harder in the mobile space. The company has a long history of dividend increases and an around 2.60% yield. Like Intel, shares are still in a decade long trading range. If its mobile OS starts to gain traction, its shares are likely to head higher.
For investors, Intel and Microsoft might actually be a good pair for income and turnaround potential. While they may never see the success they experienced with PCs, there's every reason to believe that each will be able to break into the mobile space and make plenty of money in the process. Growth and income investors should take a look at the duo.
When it comes to dominating markets, it doesn't get much better than Intel's position in the PC microprocessor arena. However, that market is maturing, and Intel finds itself in a precarious situation longer term if it doesn't find new avenues for growth. In this premium research report on Intel, a Motley Fool analyst runs through all of the key topics investors should understand about the chip giant. Click here now to learn more.
Reuben Brewer has no position in any stocks mentioned. The Motley Fool recommends Apple and Intel. The Motley Fool owns shares of Apple, Intel, and 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. Is this post wrong? Click here. Think you can do better? Join us and write your own!