Intel: A Buy Despite Mixed Results

Intel (INTC) recently reported strong results for the third quarter. The company posted total revenue of $14.5 billion, a sequential increase of 10% over previous quarter. Going forward, Intel has provided revenue guidance for the fourth quarter of 2015 and estimates it to be in the range of $14.3 billion to $15.3 billion.

Moreover, Intel posted net income of $3.1 billion, or $0.64 per share, down 6 percent year-over-year from $3.3 billion or $0.66 of earnings per share in the third quarter of 2014. However, the weakness in the bottom line was a result of a stronger U.S. dollar, along with greater than expected depreciation charges for the quarter.
But, going forward, Intel looks well-placed to improve its financial performance.

Key growth drivers

Intel is witnessing notable data center growth across each of the key segments including, enterprise IT, Comms SP, Cloud SP, Government, Academia and Science with consolidated revenue for these segments forecasted to grow over 15 percent CAGR till 2018 from $14.4 billion of total revenue in 2014.

Intel is also witnessing excellent TAM growth in the server segment, impressive share gain in the network segment and widespread silicon & sell-up footprint. The volume growth for each of the Basic SKUs, Standard SKUs and Advanced SKUs has been significant with approximately 80 percent of their volume moving up the stack since 2010 till date and delivering notable value, highest ROI.

Further, Intel has gained 1.3 times to 1.5 times of performance improvement generation over generation with development of custom-built CPUs including, 39 already introduced and 10 in Broadwell development pipeline, launch of platform integration through advanced graphics, memory, cores, Ethernet and PCIe, implementing feature innovations through Memory RAS, Turbo Mode, Hyperthreading, Virtualization and Manageability and finally, introducing new instructions such as TSX to enhance the in-memory database processing by about 6 times.

Diversification will be a tailwind

Moreover, Intel is growing its silicon footprint with its product line now diversifying from CPU to silicon photonics, fabric and memory. In addition, the combined revenue for 2014 comprised of $14 billion of data center revenue, $37 billion of logic silicon TAM and $49 billion of Logic Silicon and Memory TAM across network, storage and server. Moving ahead, Intel has also notably expanded its NB growth from -9% in the first quarter of 2014 to -7% in the second quarter of 2015 without 2 in 1 to a significant -5% in the first quarter of 2014 to 1% in the second quarter of 2015 with 2 in 1 form factor growth.

The impressively diversified product offerings of Intel from just processors earlier to the latest technologies of fabric, memory and silicon photonics along with superior 2 in 1 form factor innovation is believed to drive solid top line growth for the chip maker and thus benefit the key stakeholders.

Intel has recently cleared its intention to support commercial launch of NB-LTE chipsets and advanced product up-gradations starting in 2016 for the Internet of Things (IoT) market segment that is estimated to allow slim form factors by uniquely collaborating with Nokia and Ericsson.

The chipmaker recently introduced the highly advanced and extremely fast 6th Gen Intel Core processors for a range of desktop computers and mobile workstations. Further, Intel also launched 4K Visual Cloud and Multi-Gigabit Broadband for enhanced in-home entertainment content delivery leveraging cloud platform.


So, Intel is making a number of positive moves that will allow the company to do well in the longer term. Hence, investors should consider buying Intel despite mixed results last quarter.
Published on Oct 20, 2015
By Yaggyaseni Mittra

Copyrighted 2016. Content published with author's permission.

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