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The much anticipated Q1 2013 earning results of Intel (NASDAQ:INTC) were out yesterday and the headline numbers were really nothing to cheer about:

Q1 Key Financial Information and Business Unit Trends

  • PC Client Group revenue of $8.0 billion, down 6.6 percent sequentially and down 6.0 percent year-over-year.

  • Data Center Group revenue of $2.6 billion, down 6.9 percent sequentially and up 7.5 percent year-over-year.

  • Other Intel® Architecture Group revenue of $1.0 billion, down 3.9 percent sequentially and down 9.0 percent year-over-year.

  • Gross margin of 56 percent, down 2 percentage points sequentially and down 8 percentage points year-over-year.

  • R&D plus MG&A spending of $4.5 billion, in line with the company's expectation of approximately $4.6 billion.

  • Tax rate of 16 percent.

Q1 Key Financial Information and Business Unit Trends

  • PC Client Group revenue of $8.0 billion, down 6.6 percent sequentially and down 6.0 percent year-over-year.

  • Data Center Group revenue of $2.6 billion, down 6.9 percent sequentially and up 7.5 percent year-over-year.

  • Other Intel® Architecture Group revenue of $1.0 billion, down 3.9 percent sequentially and down 9.0 percent year-over-year.

  • Gross margin of 56 percent, down 2 percentage points sequentially and down 8 percentage points year-over-year.

  • R&D plus MG&A spending of $4.5 billion, in line with the company's expectation of approximately $4.6 billion.

  • Tax rate of 16 percent.

Intel's quarter was not great or horrible, but a yawn. In a way it was a non event. Hardly can one expect to come to any conclusion from just one quarter, but looking at the chart below we see a different picture.


(Click to enlarge)

As you can see from the above chart (compiled by me with Intel company data), revenue, net income, operating income and diluted EPS has been in a downward trajectory for about 6 quarters now. So while one quarter does not give a full picture, I think we have a disturbing long term trend.

In fact, the company has been buying back stock for a while now, but EPS is still falling.

INTC Shares Outstanding Chart
(Click to enlarge)

INTC Shares Outstanding data by YCharts

I am willing to give the benefit of a doubt to Intel and say that its rosy forecast for the rest of the year will play out, despite the fact that personal computer sales were down 14% for the first three months of year -- the biggest decline in the two decades on record. And I will give this benefit to the company because it has a much better picture of what is going on inside Intel than I do.

But taking into account the chart above, with 6 quarters of deteriorating fundamentals, do you want to be buying Intel's stock? I think not.

Intel's stock is not expensive and it's not cheap. It is priced just about right.

PE

Forward PE

Price/Sales

P/B

1y Target Est:

Potential return

10

10.6

2

2.1

22.91

5.00%

But again, with 6 consecutive quarters of deteriorating fundamentals, why would anyone want to buy Intel's stock to get 5% appreciation, if nothing goes wrong?

Remember what I have always said about great companies, they don't always make you money. Intel is without a doubt one of the best companies in the world and one of those few companies that have made our lives better all these years.

At the same time it is also one of the companies that have done nothing for investors for over a decade. Many years ago it was because it was too richly valued and today it's because its sales and profits have stagnated. Coupled with the decline in PC sales, I just can't see that many reasons why investors would want to buy Intel at the moment.

By the way, I also think Broadcom (NASDAQ:BRCM) and Qualcomm (NASDAQ:QCOM) might also share Intel's faith in the space, but for different reasons. Intel's problem is that it's cheap but stagnant, Broadcom and Qualcomm are much more rich in valuation, but with much better forward prospects.

But just as the case of Apple (NASDAQ:AAPL) proved, forward looking prospects can change. And when and if they do, be prepared for the exit and ask questions later.

Bottom line

While Intel's stock is quite cheap, I can not find any reason to be a buyer at this time. I would be a buyer if I see a decline of over 20% in the price of the stock (which I doubt), but other than that, the deteriorating fundamentals and the bleak prospects of the PC industry are the main reasons Intel's stock is not a buy at the moment.

And remember Wall Street's golden rule, when a stock is not a clear buy, then it is a sell.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Source: Intel: A Very Disturbing Long Term Trend