I like Intel's (NASDAQ:INTC) business and after the recent pullback of the share price I thought I'd take a closer look at it as a potential investment.
What's not to like? The valuation is very modest, the dividend yield at 3.85% is pretty good, the payout ratio is low and continued R&D towards more power-efficient solutions seems to consistently bear fruit.
Additionally, Intel integrated GPUs are now eating the lunch of both NVIDIA (NASDAQ:NVDA) and AMD (NYSE:AMD) in the sub-$150 discrete GPU market, and the recent Medfield-based phone release shows that Intel offerings can now be genuinely considered a contender in the smartphone/tablet sector.
However, I recently found some news that made me realize that Intel is, in fact, absolutely terrified of ARM Holdings (NASDAQ:ARMH) chips.
First of all, you need to understand that up until now, Intel has had a stellar reputation for openness amongst operating system developers. They've provided detailed hardware specs and developer manuals for their various chips for a very very long time.
Intel has said at the IDF that their upcoming Atom Clover Trail "is a Windows 8 chip" and that "the chip cannot run Linux." Now obviously, this is not quite true, as the Clover Trail uses the x86 instruction set, so there is no reason it could not boot the Linux kernel and run its userland applications just fine.
However what this DOES mean is that Intel does not WANT this chip to run anything but Windows 8 and is not going to be releasing the detailed hardware specs and manuals for developers of other operating systems and is not going to be offering any sort of support for anyone who would want to get other operating systems to run on it.
Now what could be the reason for such a sudden change of heart when it comes to openness and transparency towards developers? Why would Intel try to actively discourage any commercial Clover Trail Android products from being made?
I could of course be wrong about this (and if you think I am, do tell why!), but I believe that it's possible that Intel, feeling the pressure from the ARM/Android ecosystem has signed some sort of an exclusivity agreement with Microsoft (NASDAQ:MSFT).
In a way, teaming up together in such a way does make some sense: Microsoft (reluctantly) supports ARM chips due to market pressure and hates Android, while Intel hates ARM. Combining their efforts, they could push back against the ARM/Android ecosystem. However, what it also does tell me is that Intel is really really scared of ARM, if they are willing to put their developer goodwill on the line for this.
This makes me view Intel as a company that is not just "concerned" about its competition in the mobile space. Combined with the ridiculous 2010 purchase of McAfee for $7.68 billion, this made me decide against buying Intel stock, despite the attractive valuation.
Update: According to a new article on TechReport, Intel PR has indicated that there are, in fact, multiple flavors of Clover Trail in the works. While "the current version" is meant for Windows 8 tablets, "another version of this platform directed at Linux/Android" is in the cards.