Leading PC microprocessor manufacturer Intel (NASDAQ:INTC) will report its Q1 2014 earnings on April 15. The persistent decline in PC shipments, combined with increasing investment in building out its technology, has impacted Intel's revenue growth as well as its bottom line in the last two years. 2013 was a year of transition for Intel as it made significant progress in alternative markets with new platforms, product launches and design wins, which increased its competitiveness in the semiconductor industry. Despite a marginal decline in its 2013 revenue, Intel managed to retain its No. 1 spot in the semiconductor industry, with a 15.4% market share. 
Although Intel expects seasonal variation to lower its revenue growth in Q1 2014, it believes that the macro situation will improve in 2014 as the industry accepts innovative form factors in ultrabooks, convertibles and detachables, and as it expands its presence in new growth markets. Since August last year, Intel has introduced over 40 new products for various market segments, ranging from ultra mobile devices to data centers to the Internet-of-Things. The company expects an expanding product lineup to grow its business across a broad range of devices and price points.
Our current price of $27 for Intel is almost in line with the current market price. We will update our valuation after the Q1 2014 earnings release.
Growth In Data Centers To Remain Strong
Intel's data center business grew by 7% in 2013, backed by a 35%, 24% and 18% growth in cloud, storage and high performance computing, respectively. Last year, Intel extended its leadership at the high end as well as at the low end of the market with the launch of the Ivy Bridge-based Xeon product line and Avoton (which targets the micro-server market), respectively. It introduced the Ivy Bridge-EX, which brings the largest generation-to-generation improvement in MT Server performance, this year.
Intel claims that its data center business continues to see robust growth as a result of the build-out of the cloud and exposure of devices that compute and connect to the Internet. It expects its data center business to grow in the 10% range in 2014.
Intel derives over 20% of its revenues and approximately 28% of its valuation from servers and thus growth in this segment remains important for its valuation. Intel's server processors are based on the x86 architecture and account for more than 90% of the market. Historically, strong demand for x86 servers has been the predominant factor fueling global server shipments, especially with the decline in recent quarters of Unix-based High-end computing.
Though the entry of ARM-based players could well heat up competition for Intel in the server market, we believe the company will continue to retain its dominance for years to come.
Intel Eyes Growth In the Internet-of-Things Market
Intel was a late entrant in the mobile computing space due to which it does not (yet) have a very large presence in the market. However, the computing giant is keen not to miss the next big wave in computing - Internet-of-things. Intel highlighted its increased focus on the Internet-of-things last year when it formed a new division (New Device Group) that focuses exclusively on wearable tech, embedded sensors and other emerging product categories.
Last month, Intel completed its acquisition of Basis Science which specializes in wearable device technologies for health and wellness applications, which gives Intel an immediate entry into the wearable devices market. The company intends to build upon this foundation to deliver new products that offer greater utility and value to its customers. The wearable gadgets market is still at a nascent stage and is predicted to more than double (from $4 billion in 2013) by 2018. 
In an effort to step up new innovations and reshape the computing industry, Intel established a Smart Device Innovation Center in Shenzhen and launched a US$100 million Intel Capital China Smart Device Innovation Fund. The company aims to increase the delivery of Intel technology-based devices in China and beyond by accelerating its innovation of smart devices, including 2 in 1s, tablets, smartphones, wearables and Internet-of-things.
Intel Intends To Quadruple The Number Of Tablets Using Its Chips In 2014
While Intel has been the world's dominant PC Microprocessor maker for over two decades, it has had difficulty penetrating newer processor markets for tablets and smartphones, in which Qualcomm (NASDAQ:QCOM) and Samsung (OTC:SSNLF) are dominant. It saw significant growth in the tablet market in the back half of 2013 and its Bay Trail platform can further increase its share this year.
Intel plans to significantly increase its investment in chips for the fast-growing mobile market and lower investment in its core PC processor business. With considerable investment and effort, it has built on this and its Atom-based SOCs now power around 12 smartphones and 15 tablets. Intel's tablet volumes climbed to 10 million units in 2013.
Samsung recently replaced Intel chips in its new Galaxy Tab tablets, the Galaxy Tab 4 line-up, with Qualcomm's SnapDragon 400. Nevertheless, Intel claims to be on track with its target to ship 40 million tablets this year.
Disclosure: No positions.