You Don’t Have To Guess The Future Of Intel Corporation (NASDAQ:INTC)
Intel Corporation (NASDAQ:INTC)’s wealth mostly comes from the PC business, accounting for two-thirds of its revenue and most of its profits. In the recent years, the company has been adversely impacted by the rise of smartphones and tablets as the preferred consumer computing platforms.
It was either that Intel does something that will make consumers love PCs once again or rapidly shifts attention to mobile. Neither of these was easy and Intel the company at first didn’t seem to have a clear strategy or practical solution to its many problems. But now it has, and is where guessing Intel’s future comes to an end because there are facts you can rely on.
PC industry picking up from the ashes
After a biting downturn in the PC market in the first half of 2015, the worst exciting recovery is happening in the space and Intel can look up to a better PC environment in the second half going forward.
The end of support for Microsoft Corporation (NASDAQ:MSFT)’s Windows XP triggered corporate PC upgrades that lifted demand for and sales of PCs. That support was temporary as it was widely expected to be, but it also resulted in a massive inventory buildup that led the OEMs to cool more PC production. However, that excess inventory problem has eased, thanks in part to Window 10 refresh. Back-to-school shopping and the coming holiday season are also giving PC makers compelling reasons to restart their factories again.
Intel, big in the PC processor space, has so much to gain from recovery of the PC market regardless of how little it may be.
Altera is a positive story in wireless space
Intel Corporation (NASDAQ:INTC) has long wanted to have a deeper presence in the wireless industry. That is now possible with the acquisition of Altera Corporation (NASDAQ:ALTR).
Altera has a portfolio of field-programmable chips that can be used by wireless operators to enhance the quality of their networks especially amid the explosion in mobile data traffic. The ongoing implementation of the Internet of Things is also forcing wireless providers to upgrade their networks, and Altera chips are suited for the job in many ways.
Using Altera chips not only enables operators to put in place networks that are able to handle traffic surge, but also the behavior of that traffic. Additionally, operators that embrace Altera chips in their networks are able to reduce operating costs and eliminate bandwidth constraints. Who doesn’t want to cut costs?
The value-add in the Altera chips means that they make sense for any wireless operator looking to compete on the network quality front while also keeping costs low. The combination of these benefits should boost Intel’s top-line while also supporting the company’s land-grab in the lucrative wireless market.
Intel is paying $16.7 billion to own Altera.
Advanced memory technology – 3DXpoint
Intel’s innovative machine doesn’t go to sleep. The company recently announced a new breakthrough in the memory space called 3DXpoint. Intel worked together with Micron Technology, Inc. (NASDAQ:MU) to come up with the new advanced memory technology.
For the sake of understanding, the technology in 3DXpoint chip stands between DRAM and Flash. Intel says that the integration of the 3DXpoint is also easy and should help OEMs eliminate some less cost effective systems that they currently use.
Intel is considering putting 3DXpoint in both DIMM (dual in-line memory module) applications and SSD (solid state drive) applications. Given that it is Intel being talked about here, it is safe to conclude that the chip gorilla can get the enhanced chips based on 3DXpoint to market in late 2016 for the SSD type and early 2017 for the DIMM type.
Possessor prortfolio refresh – Skylake
Intel Corporation (NASDAQ:INTC) recently refreshed its portfolio of processors, releasing the sixth generation of the Core engines under the Skylake codename. Intel is hoping to get Skylake widely adopted in different device form factors. The adoption of Skylake for PCs is particularly expected to be game-changer of sort.
Skylake boasts superior features that PC makers can take advantage of to come up with truly innovative products. Besides promising faster speeds and longer battery life, Skylake also supports exciting media features such as facial recognition and USB Type-C in laptops.
With Skylake, Intel has the opportunity to drive significant revival in the PC industry that can go a long way to eliminate the problems of sales seasonality in the space. PC remains a key industry for Intel and technology that promising fresh lease of life of the PC industry certainly feeds the company’s basket.
Data Center efforts
Intel is predicting 15% growth for its data center division.
In the data center business, Intel has many projects aimed at generating incremental revenue. In the Big Data space, for instance, Intel has new products such as the 3DXpoint memory technology and more.
Intel estimates that the Big Data total addressable market (TAM) will reach $41 billion by 2018 from $13 billion in 2013. Hardware is expected to account for $21 billion of the Big Data TAM in 2018 compared to $6 billion in 2013.
Pricing may decline more rapidly than costs:
Competition is a serious threat for Intel. Not only is it making it difficult for the company to break into promising markets like mobile, but also eroding average selling price (ASP) for its PC products. If intense competition results in prices of PC products falling faster than Intel can lower costs, the company will be in trouble.
Weakness in PC market:
The PC market is expected to recover from the lows witnessed in 1H2015. However, the PC market still remains a cause for concern everywhere, but particularly for Intel. PC is Intel’s bread and butter. As such, if PC market fails to pick up quickly as expected, the development could end up sucking Intel’s efforts in other areas of its business.
Great exposure to market volatility:
Intel Corporation (NASDAQ:INTC) owns everything from chip design to production. On a good day that means that the company is able to squeeze the most from its assets. However, in a weak market environment, owning factories can be a serious burden because of large fix expenses.
Intel Corporation (NASDAQ:INTC) is eradicating its poverty Period.
Disclaimer: The opinions and data expressed herein by the author are not an investment recommendation and are not meant to be relied upon in investment decisions. The author is not acting in an investment advisory capacity, nor is this an investment research report. The author’s opinions expressed herein address only select aspects of potential investment in securities of the company or companies mentioned and cannot be a substitute for comprehensive investment analysis. Any analysis presented herein is illustrative in nature, limited in scope, based on an incomplete set of information, and has limitations to its accuracy. The author recommends that potential and existing investors conduct thorough investment research of their own, including detailed review of the companies’ SEC filings, and consult a qualified investment advisor. The information upon which this material is based was obtained from sources believed to be reliable, but has not been independently verified. Therefore, the author cannot guarantee its accuracy. Any opinions or estimates constitute the author’s best judgment as of the date of publication, and are subject to change without notice.
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