Intel Corporation (INTC) is the largest chipmaker in the world. As the Consumer Electronics Show in Las Vegas continues on, Intel continues to show its ability to innovate. Intel's latest announcement included a new smartphone platform for emerging markets, details on a forthcoming 22nm quad-core SoC for tablets, and more personal and intuitive Ultrabook™ devices.
As reported by MarketWatch on Monday, Intel unveiled a new version of its Atom (formerly "Lexington") that uses lower power and is designed for low-cost smartphones and tablets. As stated by Kirk Skaugen, general manager of Intel's PC client group, "(the company) is significantly extending the performance and power savings in Atom processors as we accelerate our mobile offerings in an unprecedented fashion in 2013." As announced, the new value offering includes many high-end features including the Intel Atom processor Z2420 with Intel Hyper-Threading Technology that can achieve speeds of 1.2 GHz, 1080p hardware-accelerated encode/decode, and support for up to two cameras delivering advanced imaging capabilities, including burst mode that allows people to capture seven pictures in less than a second in 5-megapixel quality. The platform also includes the Intel XMM 6265 HSPA+ modem that offers Dual Sim/Dual Standby capability for cost-conscious consumers.
In the announcement, the forthcoming Intel Atom Z2580 processor platform (formerly "Clover Trail+") targeted at performance and mainstream smartphones is also highlighted. The platform includes a dual core Atom processor with Intel Hyper-Threading Technology, and also features a dual-core graphics engine. The new platform will deliver up to two times the performance benefits over Intel's current-generation solution (Intel Atom processor Z2460 platform), while also offering competitive power and battery life.
The next-generation 22nm Atom SoC, codenamed "Bay Trail," which is already booting and scheduled to be available for the 2013 holiday. The first quad-core Atom SoC will be the most powerful Atom processor to date, delivering more than two times the computing performance of Intel's current generation tablet offering. New Improved integrated security offerings and all-day battery life are highlighted. As stated, "With Bay Trail we will build on the work done with our current SoC development and accelerate very quickly by leveraging Intel's core computing strengths."
Intel is bringing the lower-power line of processors into its existing 3rd generation Intel Core processor family, operating as low as 7 watts and allowing manufacturers greater flexibility in thinner, lighter convertible designs. The company also updates on the 4th generation Intel Core processor family which enables true all-day battery life, as stated by Skaugen:
"The 4th generation Core processors are the first Intel chips built from the ground up with the Ultrabook in mind. We expect the tremendous advancements in lower-power Core processors, and the significant ramp of touch-based systems will lead to a significant new wave of convertible Ultrabooks and tablets that are thinner, lighter and, at the same time, have the performance required for more human-like interaction such as touch, voice and gesture controls."
Intel also focuses on the emerging markets to capture first-time buyers and customers who are price-conscious and do not want to sacrifice device performance or user experience. As explained by Intel, this segment is one of the fastest-growing segments in the smartphone market.
Although there is no sign of a rumored set-top box from Intel, Intel did officially announce its new partnership with Comcast Corp. (CMCSA) that will enable customers to view live and on-demand television content on Intel-based devices, such as tablets, ultrabooks and PCs, which is made possible by the Intel Puma 6MG-based XG5 multi-screen video gateway. As reported,
"The XG5multi-screen video gateway, which is designed by ARRIS, a leading global communications technology company, allows any screen in the home to access high-quality live and on-demand entertainment. This new category of device provides video, voice and high-speed Internet via MoCA, DECT and Wi-Fi from one device creating a home network for numerous devices and second screens."
While Intel continues to dominate in PCs, Intel has been struggling in the smartphone and tablet markets. Intel is trying to catch up with ARM Holdings (ARMH) and Qualcomm Inc. (QCOM) in the mobile market. To make it worse, Intel also has to deal with uncertainty in the PC market, which has been hurt by the rapid growth of tablets. Intel was trying to push the volume by offering $599 touch-based systems. An analyst from Piper Jaffray wrote, "Weakness in PC demand is expected to continue, driven by the cannibalization of PCs by tablets. PCs account for roughly one-fourth of semi sales."
Analysts' Calls, EPS Trend, and Key Stats
On Jan. 7, 2013, the analysts at Lazard upgraded INTC from "Neutral" to "Buy" with a target price of $26.00. The firm noted that Intel's margins should bottom out in the first quarter, but for the rest of the year ultrabook sales should drive growth. In contrast, Drexel Hamilton downgraded INTC from Hold to Sell with a price target of $18.00 (from $22.00).
In the past 90 days, the current quarter estimate ending in December 2012 was lowered from $0.55 to the current $0.45. The current year 2012 estimate was lowered from $2.13 to $2.11 in the past 90 days. For 2013, analysts also dropped the estimate to $1.94, from $2.19 as projected 90 days ago, as seen from the table below.
Source: Yahoo! Finance
INTC currently has an enterprise value of $102.04B with a market cap of $105.74B. INTC has a profit margin of 22.13% and an operating margin of 29.92%, ttm. INTC generates 13.87% return on assets and 24.95% return on equity. INTC has a total cash of $10.50B with an operating cash flow of $19.49B and a levered free cash flow of $5.32B. The current book value for INTC is $9.89 in the most recent quarter.
Intel continues to generate strong cash flow and is catching up in the mobile market. More growth should be expected from the ultrabook end for 2013. For long-term bulls, the covered call options strategy can be considered to reduce the short-term volatility while generating a steady income. A daily technical quick overview on INTC can be accessed from here.
Note: All prices are quoted from the closing of January 7, 2013, and all calculations are before fees and expenses. Investors and traders are recommended to do their own due diligence and research before making any trading/investing decisions.
Disclosure: I am long INTC.