Today Intel is surging on news one of its chips will power a major tablet to be available later this month. This morning, "All Things Digital" reported the new ten inch version of the Samsung (OTC:SSNGY) Galaxy Tab Android tablet will be powered by an Intel (NASDAQ:INTC) chip, rather than the usual ARM-based (NASDAQ:ARMH) processor.
"Perhaps the most noteworthy aspect of the new tablets is what's under the hood in the 10-inch model - an Intel chip, rather than the usual ARM-based processor. It's the Intel Atom chip using the Clovertrail+ architecture that was announced back at Mobile World Congress.
The tablets will be available globally starting in June, Samsung said."
The Korea Times first reported the story on May 30, 2013 in "Intel chips to be used in Galaxy Tab3."
"This is a win-win deal for both sides. Intel, which is trying to cut its heavy reliance on PC business, offered better pricing for Samsung that is shifting its focus toward tablets following its huge success in smartphones," a Samsung research staff at one of its local factories Thursday.
"Samsung wants to secure as many processors as possible at better pricing. That's why Samsung Electronics has recently been diversifying its procurement channel in processor chips as a strategy to stabilize production yields of its in-house Exynos-branded processors," he added.
Last year, with Intel trading under $20, I wrote the Seeking Alpha article "Why Intel is a Great Buy." My main reasons I liked Intel then were:
Intel announced a $6 billion bond sale to buy back stock. This was its largest bond sale in history and it would pay less interest on the bonds than it would save on dividends from buying back the stock
At under $20, the yield on Intel stock was 4.5%
There was blood on the street. "Today I heard Jim Cramer on CNBC say Intel should have used their cash to buy ARM Holdings when ARM was much cheaper. I had to chuckle as I believe Apple (NASDAQ:AAPL) now uses its custom-designed A6 chips for its processors in iPhone 5 and iPad 4 that are made by Samsung. "
I suggested Apple and others would switch from ARM to Intel chips for performance.
I believed end of year tax-loss selling gave an extra push lower. "Finally, Intel is down about 18% YTD so there is selling pressure now to book losses to offset gains, especially for funds that aim to minimize taxes. The tax loss selling will end by the end of the year but often stocks bottom before the end of the year then outperform the first few months of the following year as funds and individual buy back the shares after the wash sale period ends."
You can see on my chart below why I also thought under $20 was a great buy based on technical analysis.
Bucking the trend on today's announcement, Intel is up 4.0% while the S&P500 exchange traded fund SPY is down 0.1%.
Today's announcement by Samsung is the first major tablet to use Intel chips. I expect others, especially Apple, to follow if they wish to remain competitive. News of more tablets using Intel chips should help Intel stock move higher as momentum investors leave ARM for Intel. With a yield of 3.7%, Intel is still attractive to dividend and other income investors as the 10-year Treasury (U.S. Treasury Rate Quotes) currently pays just under 2.2%.
A guest on CNBC, Mike Yoshikami, just said to avoid Intel because it isn't in tablets! "I think tablets are going to continue to hurt Intel." This could be exciting as "top analysts" learn the news.
Disclosure: I am long INTC. 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.