The last article I wrote on Intel (INTC) was at the beginning of the year. At that time, I stated that Intel's mobile chip transition would be important in 2013 as it built a foundation. This is what I concluded I expected to see in Intel this year:
I think the company will continue to research and build a strong foundation for the future but for 2013 to be a powerfully bullish year, I think it may rest upon the popularity of Windows 8 and not so much the mobile chip market yet.
Since that time it looks like the stock has been moving up, but it has not been easy. It almost looks like a large reversing ascending triangular pattern. The stock moved up quickly but then fell back down and is now moving up and down from top to bottom between the Bollinger bands. Presently it looks like it may bounce off a very strong resistance level close to 22. I don't think it's done moving up yet, but I believe it may have a small bounce off point from where it is now. The RSI indicator looks like it has turned and the MACD indicator has barely moved above the zero line. So this latest push against resistance does not appear to be that strong, so I would expect the stock would back off now and we might see a longer-term trading channel form as it continues to move.
It seems logical that Apple (AAPL) would want to reduce its reliance on Samsung (SSNLF.PK), which is a rival. And a natural alliance between Apple and big chipmaker Intel seems logical. Well, even though no agreement has yet been reached, it appears Apple and Intel executives have been in dialogue about forming an alliance together. While this sounds logical, Intel is a large corporation still in transition as it is looking for a new CEO to replace Paul Otellini who made an announcement last fall that he would be leaving. The company is looking in and outside for the new leader and this transition period could delay any alliance that may unfold. How probable is this alliance? Intel has increased its capital spending budget from $2 billion to $13 billion, which really looks like it's positioning itself to take over the production of Apple's iPhone-maker's "A" series of iDevice ARM system-on-a-chips (SoCs).
An alliance between the two seems both opportunistic for Intel but, at the same time, may take the company away from its original identity. Intel is a brand name and the company has developed an identity for developing its own high-quality chips as it pours a lot of money into research and development. But as technology transitions and journeys away from desktop computers looking for mobility, the writing is on the wall. The company also may need to transition into doing something else besides its own brand products if the business just isn't there. If Intel has room in its factories because business isn't running at 100%, then it makes perfect business sense to look for a large contract to fill those factories. The only problem with this is that margins may not be high enough for what Intel is used to.
Intel Wants the Notebook Market
Even though Intel still derives 70% of its revenue from the PC market, it is very much aware that this shrinking market will not be driven by desktops in the future but notebook demand. Currently, the notebook industry is about a third of Intel's value and the company has around 80% of the notebook processor market. And I do not believe that the company will lose its lion's share even though competition continues to knock at his door.
From 2009 through 2012, notebook sales increase more than doubled that of its PC neighbor. While personal computers grew by 12.5%, notebook computer sales grew by 28.5% and are expected to grow by almost another 50% in the next four years. The bulk of this growth will be shouldered by the emerging markets, which accounted for just over half its sales in 2012 and are expected to account for more than 60% of the total sales of notebook computers by 2016.
Technology seems to be morphing computers and tablets together lately and Intel has caught wind of this. At least 40 of the new ultrabook designs the company is putting out will be touch enabled and a dozen or more will be convertibles that detach like a tablet. With its new fourth-generation core processor possibly coming out this year, and boasting a 13-hour battery life, some new ultrabooks, detachables and convertibles will look very promising.
But, it is not going to be easy for Intel. AMD has already introduced its next-generation Trinity APU, which boasts a 12-hour battery life. Its performance supposedly doubles its predecessor and AMD says the chips will cost half the price of Intel's ultrabook. The Trinity notebook increased sales by 70% in the third quarter of 2012 alone.
A year ago while Intel was in transition, I wondered what it was going to do. It is very interesting watching the company now that I can see the transitions it has made not only to fill its factories with a possible Apple alliance, but also how it is expanding and pushing the ultrabooks with new designs keeping up with the mobility of the computer. I am impressed.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.