Intel's New Partnership Will Boost Your Porfolio
Maxwell is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
It is fair to say that Apple’s (NASDAQ: AAPL) iPad has everyone scrambling. So many rip-offs, cheap imitations, and laughable mockeries of it have flooded the market. The pursuit to make a similar product that does everything the iPad does and more, and to make it cost effectively, is the main focus for most companies in the touchpad, mobile device niche.
So who is doing it right? Which companies are working to meet this particular consumer need and how can the investor benefit? On the horizon, I see two companies working in tandem which might offer a great new product that will catch the consumer’s eye. Intel (NASDAQ: INTC) and Microsoft (NASDAQ: MSFT) are partnering on a new touch pad that I predict will offer a boost in stock performance in the coming quarters as they generate greater media attention.
What has Happened
To be fair, the partners are behind the eight-ball. The Qualcomm (NASDAQ: QCOM)/Apple alliance has a stranglehold on the market, making any newcomer seem like a ‘poser’. The huge success of Apple’s iPad has been the shot that Qualcomm has needed as it currently utilizes its chips based on ARM Holdings (ARM) designs.
For years, Microsoft has worked almost exclusively with Intel producing decent products such as the Windows Phone. Now, Microsoft is actively involved in Intel’s ultrabook product designs. The watchful eye from the software giant seems to be centered around the Windows 8 touch-enabled features. It now places more stringent specifications on vendors to ensure that the product will deliver a more “enjoyable experience”. (Translation: will effectively look/feel/operate like the iPad.)
The combination of ultrabooks and touch screens is something many believe could be a silver bullet in the fight against traditional notebooks and the iPad. The key to the strategy is that, while it will undoubtedly compete with the iPad, the real opponent is Apple’s MacBook Air. Apple has made the touch-based functionality an essential in mobile computing, however, it has yet to produce a notable touch-enable display to its line of MacBooks. This is what Microsoft is relying on, hoping to beat Apple to the punch and offer a touch-enabled ultrabook featuring displays of 13 inches or above. It is believed that such a product could be so popular as to account for a third of all shipped models this year alone – and more in the future.
While I personally see this forecast as a little too optimistic, I do concur that touch features on notebooks would be a great addition. Currently, when displays are touched on traditional clamshell notebooks, screens tend to shake and move a bit, making it difficult to handle tasks. A solution to this is what keeps Microsoft ‘in the room’ ensuring appropriate action by Intel.
Microsoft might also be wanting to make a better splash with this device than it did with the currently underperforming Windows Phone. It is true that the Android iOS boasts a much larger app library than available on the Windows Phone. Because of its success, it can also afford to invest in continuing improvements. Recently, Nokia said it had shipped only around two million Windows Phones in Q1 of this year, and ABI has predicted the Windows Phone would account for a paltry 2% of the 36 billion app downloads it expects to see this year. With such a performance in the mobile phone market, Microsoft is surely looking for a winner in the mobile computing market.
Where Things Are Headed
It is interesting to note that Intel hasn’t rested in its partnership with Microsoft. It has continued investing in its own growth through partnership elsewhere, as well as offering more powerful graphic chips which could be a big draw for companies such as Apple. It is also expected to roll out its newest processor, the Ivy Bridge, in the next few weeks. If Apple picks this up for its next installment of a thinner 15-inch MacBook model, it could go a long way to support the company’s image of a producer of quality graphics and performance chips in its own right, and not just another of Microsoft’s suppliers.
The strategy is clear – continue to meet commitments to current partners, but continue make oneself more attractive to others. This is an excellent strategy that will increase revenue and return strong stock performance.
Analysts across the board are seeing the positive outcomes from this partnership. As individuals, both are also great investments. With companies such as Hewlett-Packard and Dell looking to update their systems and looking to promote a slimmer design with powerful performance, Intel might be a viable candidate. And Microsoft continues to profit from having its fingers in so many pies.
Looking at retail video game sales, for example, as hardware sales fell 35% and software sales a nauseating 25%, the Xbox 360 (Microsoft’s contribution) was again the best-selling console. Its stock began this year at $25 on January 1, and traded at $32 in February. It consistently stayed at the $32 mark for the entire month of March before falling back to its current place around $30.
Summary
Intel has been a stable performer in its last four quarters earnings reports and has been above its 50 day moving average since January of this year. I have a bullish view of Intel and see earnings per share increasing through the next few quarters.
In addition, Microsoft has proven to have the depth of leadership necessary to continue driving growth and gain value with its products. It is diversified enough to be profitable, but also focused enough in its own market to be competitive. My prediction is that investors can’t go wrong with either (or both) of these strong companies.
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