Intel (INTC) is one of the largest multinational semiconductor chip makers for PCs and laptops. Its move into the mobile device market has been slow, and its core market is diminishing. However, the company has done a fantastic job in regards to trying to move forward with its finger on the pulse of the technology market and what consumers want. This is good news for the company, shareholders, and investors alike. Intel might prove to be a successful turnaround story, much like competitor IBM, whose financials are sitting at the high end of its 52-week range, and don't show any signs of slowing down any time soon. It is too early to gauge any results for Intel, but the future does look promising.
One of the company's most aggressive moves recently was its announcement of facial recognition television. This technology determines the gender and age of the person (or persons) watching TV by using Intel's processing power to analyzing incoming data, and can change advertisements to better fit the specific audience. Privacy advocates have attacked this move, saying that it takes technological advancements too far.
Several companies are in the market of openly changing how advertisements are displayed to consumers (most everyone is familiar with Google's AdWords). This technique would greatly benefit marketing corporations, as well as all the companies who are getting its products advertised to more specific audiences. Essentially, Intel is trying to prompt content providers to unbundle and give power back to the advertisers.
The company's biggest competition in this market will be Microsoft (MSFT), who is working on increasing TV-like ads in its Xbox 360 console, and Google (GOOG), who has had the plans for its Google Fiber project leaked. Anyone with a pulse knows that Microsoft and Google are industry giants, and their projects set the tone for the markets at large. Both Microsoft and Google are trading fairly close to their 52-week highs, and show no signs of slowing down any time soon. For this reason, Google, Microsoft, and Intel are all tech giants that analysts are really supporting.
In addition to trying to transition to television, Intel is also working on trying to break into the mobile device market. The company has expressed an interest in working with Microsoft and has said it would not be opposed to a partnership. It will be interesting to see if this joint venture will play out in the smartphone world. Microsoft's current Windows Phone has received favorable reviews, so this would be a very smart and beneficial decision for Intel if this were to happen. A partnership with Microsoft would ensure that Intel would not be going anywhere any time soon. Microsoft is also about to launch Windows 8, which will be a huge pull for consumers and investors.
Momentum has been solid for Intel. The company has outperformed expectations by an average of 11%. Overall, the technology sector is doing well. Intel's semiconductors attract little attention despite good performance. And, as the global economy turns out, we can expect to see an even greater increase in the good, solid performance of the technology markets.
Furthermore, Intel has just acquired some of the patents from competitor InterDigital (IDCC). Some of these patents include 3G, 4G, and LTE connectivity and wifi patents related to 802.11ac. 802.11ac technology has significantly faster speeds and will become the standard for internet technology. In total, Intel acquired the rights to 1,700 patents from InterDigital. After InterDigital announced this sale, its financials soared. On the same day, the company also announced a $100 million increase in its share repurchase program. The company should look into consolidation, but with all this recent success, it is very strong, thanks in part to Intel.
Intel has acquired these patents due to its desire to enter the mobile device market. These patents are substantial for two reasons. First, Intel will have control over a market that is growing at an astronomical pace. Second, the company will be able to cash in on IP infringement lawsuits. This was a fantastic move for Intel, but not such a great one for InterDigital. Intel completed this purchase for $375 million, and these patents will all officially be transferred to Intel by the third quarter of 2012.
Despite being a performance powerhouse in the technology market, Intel is continuously being sold short by investors and analysts alike. Intel has an A+ rating, yields 3.3%, and has raised its dividend payouts over the last five years. Intel has beat earnings estimates for the past six quarters. Intel currently has a forward PE of 9.5.
With stock prices currently trading around $25, Intel is continuing to prove itself to be strong and solid. The technology industry has not hurting as much as other industries during this time (maybe because a recent study show us people value technology over sentimental objects like wedding rings), and Intel has been at the forefront of this strength and success.
Another beneficial move for Intel occurred this week as Hewlett-Packard (HPQ) announced it will use Intel's atom chips in its new servers. This move is an advantageous one for Hewlett-Packard, as it will cut costs. This benefits Intel for having another expanding market base. Intel's chips are 'top of the line', and it will reduce power consumption in products. Hewlett-Packard is currently hovering around the low end of its 52-week range at $19, and this move to use Intel's chips may help HP get out of enormous amounts of debt. HP does not look good right now, and analysts recommend staying away, especially since it is trading lower than it was at the worst point of the recession. Using Intel's products is a way for HP to show it is serious about rebounding by riding the coattails of a successful technology company.
Zacks has recently reiterated its neutral rating of the company, claiming it would like to see how Intel enters the mobile phone market before changing any rating. Overall, analysts have recommended that Intel is a good buy at the present time. The company has demonstrated remarkable profitability, and has geared its offerings toward what its consumers want. Intel has an 80.1% market share advantage of its biggest competitor, Advanced Micro Devices (AMD). Competitor Dell (DELL) is also losing strength, and is starting to look like it cannot play in the consumer sector anymore. Commercial and enterprise segments have fallen 4%.
Intel has historically been the dominant player in the chip manufacturing sector. It does not look like this will change, at least for the time being. Intel truly has a stronghold on the market. I believe Intel is a fantastic investment right now, as it would be beneficial to investors to capitalize on all of the company's growing successes.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.