Seeking Alpha
Long/short equity, deep value, special situations, growth at reasonable price
Profile| Send Message|
( followers)  

Summary

  • PC sales decline is over.
  • LTE is finally here to fuel mobile growth.
  • The company is hitting on all cylinders.

For the past couple of years the main rap on Intel (NASDAQ:INTC) has been the declining PC market. "The Death of the PC" has been repeated ad nauseum over that time. Well, the decline of some formats of PCs and the conversion to newer more portable versions and the overall growth of X86 based computing platforms appears to have returned to growth. The negative headline will be replaced with something like "The Rebirth of the Personal Computer."

Yesterday IDC and Gartner reported first quarter PC sales. IDC claims sales were down 4.4% YOY, better than expected. Gartner claims only a 1.7% decline for the quarter.

I've been waiting for these numbers not for their accuracy, but for their directional indication, which is positive.

Both of these third party market analysis companies' numbers have differed from the actual numbers reported by Intel. We can quantify the difference for the year of 2013. Both IDC and Gartner claimed (1 2) the PC market was down 10%, give or take, in 2013, while Intel claimed the client PC business (see below) declined in 2013 by 4%. After all, we are most interested in how many PC chips Intel actually sells and only use the IDC and Gartner numbers for predictive analysis, however flawed that has been.

So the inaccuracy of the third party analysts amounts to 6% in 2013. If we add 6% to the most recent IDC and Gartner numbers, the client PC business, as defined by X86 chip sales, is growing again. Since the client business is the largest Intel business unit and a galactic scale cash generator, Intel permabulls like me have reason to dance in the streets this morning.

Intel modeled 2014 revenue guidance as flat with growth in important sectors offset by a mid-single digit decline in client PCs, the largest segment.

If we replace that -5% with what appears to be a +5% in client units, the midpoint of first quarter sales moves from $12.8 billion to something like $13.75 billion, with high guidance of $14.25 billion.

With this latest indication on the client PC business, Intel can be viewed as hitting on all cylinders with the turbocharger spooling up.

My personal favorite catalysts for future growth are the XMM 7260 LTE chip being in shipping mode. The best application processor in the world is at a tremendous market disadvantage without a companion LTE chip. That is a big deal for progress in mobile.

The break-over of the software group into profitability last quarter was another biggie for me that seemed to be a yawner for the analysts.

Brian Krzanich had a laundry list of catalysts that he pointed out during the 4tfourth h quarter conference call.

From the SA transcript:

"The PC Client Group was down 4% for the year, but the business began and stabilized and actually grew a bit in the fourth quarter achieving all-time records of i5 and i7 unit shipments. The desktop business was particularly strong in Q4 growing 11% over last year. In the data center, we finished the year up 7% with record solar unit and revenue. Cloud was up 35%. Storage was up 24%. And high performance computing was up 18%. Enterprise, however, fell short of our expectations for the fourth quarter and the year as we overestimated the rate of recovery among corporate buyers. In our other businesses the intelligent systems business we saw a growth of 21% in retail, up 16%, and transportation up 21% in the year. Networking grew 31% for the year and rounding out the list, our NAND and (indiscernible) businesses grew 15% and 4% respectively both achieving record revenue."

Now it appears the enterprise business is improving, as well.

Can you hear the turbocharger beginning to whine?

I'm buying long-term for the earnings announcement next week.

I don't say this frivolously, but as I wrote about Micron (NASDAQ:MU) in early 2013, if you can only buy one stock for 2014, make it Intel and use as much leverage as you feel comfortable with. As always, don't use grocery money!

Source: Intel: Are You In For The Run Up?