Intel Corporation (NASDAQ: INTC) has had an up-and-down year to say the least. Starting 2013 as a top five stock pick in the minds of many experts and investors, due in large part to its affiliation with Apple, the company showed slow signs of growth over the first quarter of the year, peaking in early June and has since been on a slow decline.
Wednesday, July 17, Intel's Chief Executive Brian Krzanich announced that Intel was cutting its revenue forecast for the year and reducing spending. Unsurprisingly, this led to one of the company's sharpest declines in stock prices on Thursday, July 18.
While it may seem like Intel is suffering from mismanagement with these declining revenues, the quick response of cutting spending by CEO Krzanich actually demonstrates a rush to correct a serious issue. Intel is not suffering alone. With the growing mobile market, the PC business has been on a steady decline, leaving companies like Intel and Microsoft scrambling for ways to fit into an evolving industry.
According to the press release from Reuters, CEO Krzanich acknowledged the mistakes of the company in their slow response to the rapidly-emerging mobile market, and has been adjusting the business model since his May takeover to try to capitalize in the areas where Intel has fallen behind. While the revenue report from Intel showed no signs of growth, it also showed no signs of financial decline, which means Krzanich expects the cut in spending to keep the company in the black as they work toward better results in the mobile market.
Despite the report from Intel this week, when it comes to determining long-term prospects for Intel stock, it is essential to keep in mind that cuts in spending have not stopped Intel's efforts toward becoming more mobile-market sector compatible. At Computex in June, Intel demonstrated their new Silvermont chip, designed for use in mobile devices.
This chip offers twice the CPU and three times the graphics capabilities of the company's top previous mobile processor. Designed to work with both Android and Windows 8, Silvermont is expected to offer more than eight hours of battery life, putting it on par with today's leading mobile processors.
The recently-released 10.1-inch Samsung Galaxy Tab 3 also features an Intel processor for the first time, according to PCMAG, showing that some of Samsung's company restructuring is paying off with business from leading mobile manufacturers.
The Desktop Industry
While there is some question as to how long the relationship will last, or how long Apple desktops can continue their sales in the face of the decline of PCs, at current Samsung is also still in tight relations with Apple when it comes to the Mac Pro. When Apple announced its newest Pro in early June of this year, it came with a brand new cylindrical design, but kept things running with an Intel processor, ending some speculation as to whether Apple would jump ship to a cheaper processor.
There is no denying that the news for Intel over the past few weeks has been contradictory. After announcing a new mobile platform relationship and their continued relationship with Apple for the Mac Pro, the company still reduced its expected earnings and its expenditures. To some, this looks like the ship is sinking. To others, this looks like a shrewd business move to give the company more time to get bearings in the changing processor market. By keeping spending in check and reducing expectations, company leaders demonstrate they know they have work to do before becoming a market superpower again.
This is the good news if you are looking to invest in Intel. Shaky reports and sweeping changes scare off casual investors, meaning sells are high and stock prices are down from what they were just a few months ago.
Don't count Intel out. There decision to play it safe in this week's expected earnings report indicates the company will have a share in the market for many years. In what manner they continue to serve the industry and how large that share will be is heavily dependent on how the company changes under Krzanich to become a more mobile-focused chip-maker and can make supplying desktop devices a secondary function.
For now, while the market is in a frenzy over Intel's report, prices are down, so it's a good time to buy if you are in for a long-hold and don't look to turn a profit in a few months.
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.