Intel (NASDAQ:INTC) has been recognized as a world class processor company for a long time. It has changed the electronic and tech world ever since the invention of its first microprocessor in the late 1960's. Intel's microprocessors are used in more than 80% of the world's computers. It is considered one of the pioneers of the technology world. Its future revenues depend upon the products that have not yet been created and placed in the market.
Intel wants its microprocessor to be used in tablets but will have to fight hard to have it so. In the Apple (NASDAQ:AAPL) iPad, and in most of the other tablets in the world, ARM Holdings (ARMH) processors are used. CNN Money has released a news report in which it stated that ARM chips show 30% of the sales in the global semiconductor market (smartphones), which is double Intel's 16%:
Soon after that realization, the "feature phone" was born, which ultimately evolved into the modern day smartphone. Taking advantage of the situation, ARM now designs chips for two purposes: The same-old modem processor and an applications processor that controls the user interface for Android, iOS, Windows Phone, BlackBerry OS and the like.
Intel is trading at $28 with a 3% yield in its dividend. Analysts have estimated that, over the next five years, the earnings of Intel will increase by 11.70% a year. It is estimated that Intel's earnings have been increased by 21.2% on quarterly basis. The year 2011 is considered to have been a record year for Intel with an increase of 24% and 64% in its revenue and profit margin, respectively. In the last quarter of 2011, the company made some nice moves and decisions in its financial as well as technology division. As a result, its earnings per share increased by 9% to $2.4, as compared to $2.03 last year.
One of its major competitors, ARM Holdings, has shown a 0.60% yield in its dividend and its shares have traded at $28. ARM provides micro processing licenses to its handheld device-based customers. Due to its competition with Intel and AMD, the company has developed a microprocessor that is energy efficient and cost effective. It is named Cortex MO+ and hese processors will be used in medical devices. However, ARM Holdings is a bit overpriced because over the next five years it is expecting to have an average increase of 17.5% per year in its earnings.
Advanced Micro Devices (NYSE:AMD), another of Intel's rivals, is not as aggressive as ARM. It has most of its products used in Apple devices like MacBook Pro. The company has recently gained an acquisition of a high-bandwidth micro server named SeaMicro. According to a press release:
The acquisition of SeaMicro, which will now become AMD's Data Center Server Solutions business, enables AMD to accelerate its strategy to deliver disruptive server technology and provide its customers serving Cloud-centric data centers with highly-differentiated AMD-based solutions beginning this year.
According to the AMD annual report for 2011, the company's operating income dropped from $850 million in 2010 to $368 million in 2011. It also gained gross profit margins of about 45% in 2011, which was slightly lower than 46% in 2010. There was an increase in its cash flow by 48% ($528 million). In the first quarter of 2012, the company is expecting a drop of 8% in revenue. AMD is also focusing on emerging markets, low power processors and cloud computing, to compete against Intel and ARM Holding.
The aforementioned discussion shows that Advance Micro and ARM Holdings will try to compete against Intel by gaining market share in the handheld tablet market with their low power micro processing chips. For this reason, Intel is now focusing on the development of its power efficient chips like Ivy Bridge, Medfield Atom Chip and Haswell products. According to their agreements with Intel, Lenovo (OTCPK:LNVGF) and Motorola Mobility (NYSE:MMI) will use Intel's Medfield Chips in their products. The company is launching a Study book tablet which will be priced below $199 and will target emerging economies like China, India and Brazil etc. Intel is also designing a new product, the Ultrabook, to compete with Apple's MacBook Air. According to Intel, the motto of the Ultrabook is "responsiveness, mobility with battery life and connectivity, aesthetics and solid design, and security". Unlike Apple, Ultrabook will offer touch input and will run Microsoft Windows 8 at a low price.
Intel is also making its way into cloud hardware and it will soon announce its first server chip in the Xenon Series. It will have 3D transistors installed in it. These chips will work faster than other chips already on the market. Intel will also release its 400GB to 800GB solid state drives, which will be faster than its previous drives. Intel has named this series as SSD 910 and it will be released in the middle of this year.
Due to these efficient and high performance products, Intel will easily maintain its pioneer position in the global market. The company might face a small fall in its stock, however, this drop will not last very long as, in my opinion, the sales of its Ultrabook and other upcoming products will surely bring good fortune to the company. In my opinion, AMD can be placed in your watch list instead of buying its stock, because ARM will be a good choice to buy once it shows a little drop in its price. On the other hand, I would recommend buying Intel.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.