Intel (INTC) is pushing to compete in the growth of tablets by increasing its advertising for ultrabooks. The marketing blitz will be the biggest initiative in 8 years, when Intel introduced the Centrino chip. This time, the focus will be on thin and light notebooks. The campaign will begin in April.
The year 2012 has already seen the rise of shares in companies that will benefit from the push for ultrabooks. Year-to-date, Microsoft (MSFT) is already up 12.6%, Intel is up 10.23%, OCZ Technology (OCZ) is up 32.83%, and Micron Technology (MU) is up 18.12%. Is there more upside for these companies?
A Look at Ultrabooks
Ultrabooks have similar characteristics to Apple's (AAPL) MacBook Air, but computer makers plan to launch 75 models. At CES (Computer Electronics Show), ultrabooks were seen everywhere. Bombarding consumers with so many choices will prove to be self-defeating. Apple offers just one base 'Air' model that varies only by storage size and screen size. If rumors that Apple's iPad 3 are true, consumers may choose a tablet over an ultrabook because the appeal for tablets and the Apple app store environment would be more appealing than a thin laptop that costs $1,000 and runs on Windows 7.
Storage
Pricing pressure for SanDisk (SNDK) was a concern when the company reported its earnings. SanDisk forecast strength in SSD for the second half of 2012. Softer demand in the mobile space in the fourth quarter is hurting the company's ability to sell at a higher price this quarter. If demand in the mobile space is weakening, then chances are that PC makers will have a hard time selling Ultrabooks.
Micron, which recently backed down from resistance at $8, will likely trade lower in the weeks ahead. Micron is a company to avoid for the time being. Micron closed recently at $7.43. Similarly, OCZ rallied past an $8 share price, and closed recently at $8.78. OCZ differs from SanDisk and Micron, because the company is benefiting from SSD drive demand due to a drop in prices. OCZ is planning to use TLC (triple-bit-per-cell) NAND flash memory in the first quarter for its drives. A price drop of up to 30% will help OCZ. OCZ Technology is a company to buy.
It should be noted that Western Digital (WDC) does not think SSD drive demand will not increase from ultrabooks. Seagate (STX) and Western Digital are close to 52-week highs. Seagate announced on January 27 that it would continue a share buyback and the company increased its quarterly dividend by 39%.
PC Makers
Dell (DELL) and Hewlett Packard (HPQ) are beneficiaries of a surge in ultrabook demand. Dell shares are up 14.42% year-to-date, while HP is up 8.23%. Given the historically low margins for PC makers, these companies will not see a huge benefit from ultrabooks. Sales in the premium device would represent a small percentage of total sales.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
