At it was analyst day yesterday, Intel (NASDAQ:INTC) had a set of powerful slides setting out its plans for continued advances in processor technology. Included were commitments to deliver 64 bit Atom chips for tablets in 2014 and to provide chips for every price point with a target of shipping 40 million processors for tablets I 2014.
The market yawned.
Intel's CEO advised analysts that at this point (November 2013) it saw flat revenues for 2014. Consensus was for growth of 1.4%. That is right 1.4%, or about $800 million on a base of $53 billion.
The stock tanked, down 6% on the news.
There is not an analyst on Wall Street or a CEO in corporate history who can forecast annual revenues within 1.4% with any accuracy. Get real. A new CEO in a market where its core products are declining and with an aggressive plan to enter new markets (i.e. mobile) in a big way tells analysts that next year revenue is going to be flat instead of growing by a fraction and the market becomes hysterical.
Let's focus on the real news.
Intel will have 64-bit architecture on a 14nm process for tablets and smartphones in 2014 including integrated 3G and HSPA+, which is where most of the developing markets are today.
When Apple (NASDAQ:AAPL) introduced a 64-bit processor the Apple fans practically swooned with glee and railed on about how this put Apple in the forefront of processor technology, was bringing desktop power to mobile, and that competitors would never catch up.
Apple's A7 processor is a terrific advance. Even more importantly, Apple gets more out this advance by integrating the functions of its OS with the architecture of the processor. It is a major step and every Apple enthusiast should be proud of Apple management for their efforts in bringing it to fruition.
But it does not change the competitive landscape but just keeps Apple in the fray with competitive products. And there is very little doubt that Intel's 14nm process will yield a faster processor drawing less power than anything that preceded it, including the wonderful A7. I have no doubt Apple will soon have an A8 to keep itself abreast of the advances.
This is a war and one worth winning. Apple is a contender. So is Intel. Don't be fooled by the hype.
Intel plans to keep advancing. By 2015 (thirteen months from now from those who are calendar challenged) Intel will have its next generation Atom Goldmont in production with converged cores for both tablets and phones and integrated LTE multi-communications connectivity. This is where the developing markets are going.
In my personal opinion, CEO Kraznich was wise to lay the table for 2014 by saying he expected revenue to be flat. First, it is the truth, which has a wonderful ring to it. Secondly, it keeps expectations in check in a very competitive marketplace where hype is rewarded early and punished soon after if expectations are missed. Finally, with any luck he has a decent chance of beating that bogie. All it will take is for consumers to warm up to hybrid devices with full Intel Core processors and for more Android device manufacturers to choose Intel Atom processors than Nvidia (NASDAQ:NVDA) or other ARM based chips than currently in sight.
If the new Atoms perform as advertised I expect those device manufacturers will choose Intel. They know that the customer could care less whose processor is in the tablet. What they really care about it battery life, processing speed and graphics rendering. If they can get better results with Intel they will choose Intel. Their customers will demand it.
Disclosure: I am long INTC. Long Intel. Short Apple. Both through calls. 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. I hold calls on 180,000 Intel shares and may buy more