Going Slow But Still Steady
Subhadeep is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
When chip behemoth Intel (NASDAQ: INTC) predicted that its forthcoming third quarter revenue is going to be lower than analyst estimates, smart investors automatically realized that the problem was not just limited to a single company. This was increasing proof of the fact that concentration on developing economies such as China and India to bolster PC sales is no longer enough to counter the effects of a slowly recovering US economy and stagnating European markets. Smaller rival Advanced Micro Devices (NYSE: AMD) had already put up the red flags recently when it announced a substantial 11% revenue drop, thanks to unexpected weakness in China, the biggest computer market. Even Intel’s major customers such as Dell (NASDAQ: DELL) have acknowledged that Asia is no longer a safe bet to counter slow-moving home markets.
And that may not be the only problems Intel is facing at the moment, given the fact that the world as a whole is witnessing a significant shift towards mobile devices such as smartphones and tablets, which means PC’s are increasingly taking a backseat. The company, whose chips power 80% of the world’s personal computers, knows that it has been pretty late in catching up on the smartphone revolution, which has given the competition a head-start, and also that it faces an uphill task as it has to counter the stranglehold of companies building mobile processors based on ARM’s (NASDAQ: ARMH) designs.
Its not that Intel is not being aggressive, as it engaged in a face-off with NVIDIA (NASDAQ: NVDA) while designing processors for Microsoft’s Surface tablet. It also has aggressive plans of its chips that will soon be featured in a host of smartphones, tablets and Ultrabooks in the near future. At the same time, Intel can only wish that Microsoft’s Windows 8 operating system is launched as soon as possible. It knows people are simply withholding PC sales as they wait for the Windows 8 launch.
Having said all that, there are a number of factors that sets Intel apart from the competition. This is one big ship we are talking about, that has the ability to sail through choppy waters. Let’s start with the chip design itself. Intel has announced plans to shift to an even smaller scale from the 22-nanometer chip production process, meaning more compact, less power-hungry processors in the future; a sure winner in the market. And that’s not all, as the company’s sheer size and financial clout means that it has the ability to fund research to develop better products, which is crucial as it operates in a world where constantly changing innovation is the name of the game. And on top of that, the company is confident that the Ultrabook segment will grab as much as a 40% share of the consumer laptop market this year itself. This is one stock you should actually keep for the long run. Fool on!
subhadeeptech has no positions in the stocks mentioned above. The Motley Fool owns shares of Intel. Motley Fool newsletter services recommend Intel and NVIDIA. 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.