Tags: INTC | AMD | QCOM | IFNN

Intel: Solid and Steady, if Slow

By    |   Friday, 09 Sep 2011 02:35 PM

Intel (INTC), the world’s largest semiconductor maker, is no longer the growth company that it was in the 1980s and ’90s. But it’s still humming along. Obviously, Intel is dependent on the sale of personal computers, a market it dominates. But as long as the global economy doesn’t re-enter recession, personal computer sales won’t fall out of bed and Intel will continue to see a solid revenue stream.

The company now pays a dividend that is highly competitive for a blue-chip stock. Its yield recently stood at 4.3 percent. In the PC market, Intel has basically put its biggest competitor, Advanced Micro Devices (AMD), in the rear view mirror. Intel’s plans to offer new chip architectures every two years should keep things that way.

The biggest problem for Intel is probably the shift from PCs to smartphones and tablets. Intel chips haven’t been a factor in that market so far. The leaders are Qualcomm (QCOM), Texas Instruments (TXN), and Samsung.

But Intel may eventually get competitive in this area. Its $1.4 billion purchase of Infineon Technologies' (IFNNY) wireless solutions business earlier this year can help.

Moreover, the movement to tablets comes part and parcel with the development in cloud computing, which stores computing tasks on the Internet. The cloud will require plenty of growth in servers, which represent the most profitable area of business for Intel.

Analyst caution

The company reported record revenue in the second quarter for the fifth straight quarter — $13.1 billion, up 22 percent from a year earlier. Profit totaled $3.2 billion, up 10 percent.

Standard & Poor’s analyst Clyde Montevirgen has a hold rating on Intel shares. “Intel has the best competitive position in our semiconductor coverage universe, a solid balance sheet, and strong free cash flows,” he writes.

“Although we think that the company will continue to thrive in the PC and server segments, we expect INTC's limited share in fast-growing portable markets to limit top-line advances, and we see acquisitions hindering profitability improvement this year.” The company reports next around Oct. 18.

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Intel (INTC), the world s largest semiconductor maker, is no longer the growth company that it was in the 1980s and 90s. But it s still humming along. Obviously, Intel is dependent on the sale of personal computers, a market it dominates. But as long as the global economy...
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2011-35-09
Friday, 09 Sep 2011 02:35 PM
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