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The Apple (NASDAQ:AAPL) led mobile device revolution is disrupting the market for computer components. Many component maker stocks are trading at valuation multiples that could offer investors the opportunity to buy steady income at attractive valuations, or to buy growth at reasonable prices.

Intel's Regime Change

Intel's (NASDAQ:INTC) Paul Otellini, president and CEO expressed his intentions to resign as of May 2013, after serving the company for almost four decades. He was Intel's CEO for the last eight years.

Under Otellini's leadership, Intel was able to recover from a sharp drop in earnings by 42% in 2006. Otellini achieved record profit and sales since 2010. The end of his reign weathered the very tough PC global market. However, during this same period, Intel took market share from competitor Advanced Micro Devices in the PC server segment.

Market research firm IHS iSuppli forecast the very first annual decline of the global PC market, shrinking by 1.2% to 348.7 million units by the end of 2012. In October of this year, Intel reported slim fourth-quarter profit margins attributed to sluggish factory output and slow moving chip inventories.

The Board of Directors will consider both internal and external candidates to replace Mr. Otellini, though the company has never chosen an external candidate ever. Among the internal candidates, the board is looking at Stacy Smith, chief financial officer and director of corporate strategy; Renee James, head of Intel's software business; and Brian Krzanich, chief operating officer. These candidates were automatically promoted to the rank of Executive Vice President after Otellini's announcement. External replacements could be Sanjay Jha, the former CEO of Motorola Mobility Holdings, or perhaps select key officers from Qualcomm (NASDAQ:QCOM). Doug Freeman, an analyst at RBC Capital Markets said, "Intel should consider external candidates, including someone with experience changing course at a large company."

The CEO's announcement led Intel's shares to climb less than 1%. This is a small change in comparison with the stock's 16% decline this year.

Otellini could have run as Intel's CEO until May 2016, before hitting the firm's mandatory retirement age. For this reason, his decision to leave could have been based on upcoming problems at the company that either he or the board did not want him to manage.

Apple May Drop Intel

Apple is investigating ways to replace Intel processors in its Mac personal computers with a similar version of chip technology that it uses in its iPhone and iPad. According to engineers, a shift to its own designs is necessary as mobile devices and PCs are developing similar features. Any such change would have a negative impact on Intel's market position, which is already hurt by the stagnating market for computers and its failure to capture a majority of the mobile gadgets market.

Over the past several years, Apple has acquired various chip companies, appointed engineers and has created designs based on the technology from ARM Holdings for its iPhone and iPad. ARM licenses chip designs and technology to various phone chip companies.

The company announced that its semiconductor team has ambitious plans for the future. The team is working on creating an enhanced uniform experience for all its devices by melding iOS with the Mac. The main focus for the shift is to create thinner and smaller products without sacrificing their performance. Plans are being made to appoint a contract manufacturer, such as Taiwan Semiconductor, to create the Apple-designed component based on ARM's technology.

The company's engineers have built the iPad based on phone chips using ARM technology rather than Intel's PC processors.

iPhone 5 Supplier Woes

Supply constraints for Apple's newest smartphone model could hurt Jabil (NYSE:JBL) and delay payback from its ambitious capital spending. About 70% of Jabil's cash investment for 2012 was spent to accommodate the production aluminum casings for the iPhone 5. This $337 million investment helped the manufacturer make component,s which could readily meet the high standards Apple demands for every component.

Jabil's revenue has gone up by 2%, but net income fell by 28 percent. Lower margins could be a result of Apple demanding a much higher quality casing for the iPhone 5. Clearly, supplying Apple has grown sales but it has ravaged profits. Things are not looking up for Jabil at the moment. Net income dropped from 52 cents a share last year to just 39 cents a share last period. For the quarter ending in November, Jabil estimates that its per share earnings will be between 51 and 62 cents per share, short of the 67 cents per share that was projected before the iPhone 5 project ramped up expenses.

Searching for Value in Component makers

Financial ratios for these companies follow:

Ticker

Company

P/E

P/S

P/B

P/FCF

D/E

Jabil Circuit

10.11

0.23

1.85

54.53

0.8

Intel

8.77

1.86

2.03

30.71

0.15

Apple

13.2

3.5

4.63

13.23

NA

(NYSE:AMD)

Advanced Micro Devices

NA

0.23

1.42

NA

2.06

(NASDAQ:ARMH)

ARM Holdings

71.94

19.59

9.31

NA

0.09

I would never have guessed that Intel would trade at a single-digit P/E ratio. Jabil and Intel are both very cheap and are on opposite sides of the struggle for dominance being waged between computing and mobile device giants. They are both cheaper than Apple on a price-to-sales and on a price-to-earnings basis. The only company on this list that is cheaper is Advanced Micro Devices, and this company has had issues establishing profitability and has a high level of debt financing.

Conclusion

Intel and Jabil are buy candidates for the long-term investors. Jabil shareholders could benefit from it sales growth derived from its attachment to the Apple growth story. Intel is more of a contrarian play, though it is clearly trading at low valuations.

Source: 2 Tech Growth Plays To Consider Now