Here's Why Intel Is Poised for a Breakout

I have been an Intel (INTC) bull for a long time. Despite the downfall of the PC market, I think Intel represents a great investing opportunity for value investors as the company has a nicely diversified business model.

Intel has faced many difficulties throughout the past few years. PC sales are going stale, and along with them chip sales to PC OEMs are also suffering. The company still has weak presence in the mobile processor segment. After suffering from the mobile sales decline, the company paid heavy subsidies to gain market share in the tablet market, but the strategy failed when the tablet sales starts decelerating around 18 months ago.

Therefore, despite putting huge resources into entering in the tablet market, the company relished a near-term surge in mobile sales.
However, there’s a bright light at the end of the tunnel as Intel secured a powerful friend in China—Xiaomi. Xiaomi, which is one of the world’s top smartphone manufacturers, recently introduced its new Mi Pad 2 tablet based on Intel’s processor.

Intel’s contribution in the Xiaomi tablets can act as a game changer, as according to IHS, Xiaomi controlled around 16% of the overall smartphone market in China in the third quarter of 2015. Xiaomi has grabbed such a large portion of the smartphone market in just over five years by selling high definition smartphones at lower prices.

Xiaomi’s tablet business is much less significant as compared to its smartphone business, as its sales come only from the greater China. However, Intel powered Atom processor into 46 million tablets last year and Chinese consumers apparently bought 40% of those tablets.

Xiaomi’s strategy to expand its robust smartphone business into tablets could promote the profile of Intel’s low-cost designs. Xiaomi replaced Nvidia’s Tegra K1 processor with the Intel’s Atom X5 processor in the Mi Pad 2.

Xiaomi has given a great opportunity to Intel which could reverberate with other OEM’s. Mi Pad 2 is available for around $156 and is more powerful as compared to most of its ARM-powered competitors. Xiaomi might prolong its partnership into smartphones segment as well, if the company’s new technology design supports Xiaomi sell more tablets at profitable margins.


After spending lots of money into the smart devices industry, it seems like Intel’s decision will finally reap profits. The company is slowly but steadily diversifying itself and the increased exposure to the smart devices industry will act as a long-term tailwind for the company. I strongly believe Intel has about 15% more upside potential, making the stock a great buy.
Published on Dec 10, 2015
By Akshansh Gandhi

Copyrighted 2016. Content published with author's permission.

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