It is no surprise or secret that tablet computers have been hurting Intel's (INTC) bottom line. The chip maker has publicly conceded that the weakening market for personal computers with microprocessors will even bring a shortfall to third quarter revenue (when compared to the prior year). Meanwhile, the company is trying to adapt by designing more powerful and efficient chips for tablets. Some of these chips will be used in tablets that run on Windows 8, which makes sense since Intel chips are used in most Microsoft Windows operating systems.
Even though it acknowledges a slowdown, the chip giant has not given up on marketing PCs. Intel hasn't been sitting idle when it comes to trying to move PCs again. In India, it started a new marketing campaigned called "Go Do Something Wonderful" aimed at highlighting the benefits of using a PC. Personal computers in India have less than a 10% penetration while 40% are youth. Intel is hoping to take this campaign into a whole PC movement.
Investors are getting increasingly critical of Intel's strategy considering its recent lower forecasting. All this has brought the value of the stock way down in the last month. Motorola is launching the first smartphone with an Intel chip in Europe right now. It now has partners selling smartphones based on its chips and in many cases its designs in China, Europe, Russia and India but the stock still has not slowed its descent. Analyst Auguste Gus Richard of Piper Jaffray said:
"In a post-PC era, we believe CPU [central processing unit] performance matters less and the ecosystem and differentiation matter more than ever. It appears, however, the company continues to believe things will be fine if they just build a better CPU. We believe the need for Intel to shift its business model has become obvious."
Intel's next generation mobile chip has been called a "has been" by analysts and the ultrabooks have not drive demand back into the PC business.
"Although macro weakness certainly is a factor, we think the bigger issue is that Intel's Ultrabook strategy does not appear to be working." Chris Caso of Susquehanna
Many would argue that Intel has already been responding to the "iPad wake-up call." The company has responded to market needs and criticism by developing much lower-power chips. Whether it will make much of a dent in the dominant position of chips designed around ARM Holdings PLC, is the bigger question.
The stock is still in a downward pattern and recently dipped faster than it was doing. It is sliding down the lower Bollinger band and using the middle band as resistance. When this happens, it shows a strong bearish trend in place. Both the MACD and the RSI support this strong move down and there is no indication that it is ending at all. It is a very bearish stock. The recent move down was a lot quicker and I do not believe it will sustain a move like that.
Just like when the cheap Japanese chips flooded the markets, forcing Intel to transform itself into a micro processing company, so I believe the company will evolve this time just like it did going from CPU to microprocessor. It is just something that is going to take time. It has been in this position before and transformed itself so I believe it can do it again. The stock may be very bearish right now, but I believe long term it will thrive as it transforms itself into mobile chip maker as well as a PC company.