Intel: Slow But Steady Wins The Race

| About: Intel Corporation (INTC)
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Do a search for Intel (NASDAQ:INTC) and you are bound to find more than a few articles about how the company "missed" the mobile market. Intel's processors do power several smartphones, but they have not made their way into any of the more popular phones, like Apple (NASDAQ:AAPL) iPhones -- yet.

On the Horizon

Intel has two innovations on the horizon that I think are especially promising. The company recently announced that fourth-generation Intel Core processors would be released in the near future, and the company is making strong moves towards gaining a better foothold in the mobile market. Earlier this year, Intel introduced a low-power multi-band 4G LTE global modem, called the Intel XMM 7160, which could become a new standard in the mobile computing market. I think the combination paves the way for big success on the horizon.

"The 7160 is a highly competitive 4G LTE solution that we expect will meet the growing needs of the emerging global 4G market. Independent analysts have shown our solution to be world class and I'm confident that our offerings will lead Intel into new multi-comm solutions," said vice president and co-general manager of Intel's Mobile and Communications Group Hermann Eul. "With LTE connections projected to double over the next 12 months to more than 120 million connections, we believe our solution will give developers and service providers a single competitive offering while delivering to consumers the best global 4G experience. Building on this, Intel will also accelerate the delivery of new advanced features to be timed with future advanced 4G network deployments."

It's All About Timing

Intel didn't miss the boat. It got there first and was just waiting on everyone else. The issue was timing and Intel did it on purpose.

Intel's core strategy is referred to as "Tick Tock." The basic idea is for the company to boost its manufacturing process technology one year, then work on its micro architectures the next. Historically, this meant increasing transistor density one year, then improving manufacturing efficiency the next -- a smart strategy given that there are always growing pains. By making sure that a new architecture is never introduced at the same time as a new process, Intel was able to avoid many of the double-faced problems that plagued rival Advanced Micro Devices (NASDAQ:AMD) so publicly.

Like a tortoise, Intel is moving slow and steady toward the finish line rather than jumping as soon as a product is developed. This allows the company to develop a solid footing before moving forward, and limit the risk of eroding its customer base as a result.

Knowing the Market

I see it like this. Intel could have been more aggressive in pursuing mobile technologies. It is a large company and an innovator. It could have taken the steps necessary to become a real player, but chose to wait instead.

As smartphones have become more like mini-computers, Intel has stayed its course, dabbling in mobile technologies but keeping the bulk of its resources into making faster processors. As a result, the company has been able to make laptops faster and lighter, and that in itself is a huge catalyst to success.

Wells Fargo analyst David Wong said it best in a recent quarterly report on microprocessors:

In our view, the investment community is appropriately excited about the tremendous explosion computing that is sweeping the globe. However, we think that many investors incorrectly conclude that the growth potential associated with this is limited to smartphones and tablets, driven by ARM-based processors. Consumers and businesses are increasingly connected electronically, and this is facilitated by a broad range of computing devices, including smartphones, tablets, notebooks, desktops, and servers. Hardware and software improvements are enabling fully fledged notebooks to approach tablets in turn-on time, battery life, and weight, while offering substantially more capability. We think that the growth potential and value of Intel's very broad range of x86 processors has been significantly underestimated by the financial community.

Going forward, as consumers expect smartphones to do even more and become more tolerant of larger phones (which of course have room for larger processors), I think Intel is going to emerge as a major player -- and I think Intel's XMM 7160 is the first step towards that.


Right now, Intel is trading just under $24 on a 52-week range of $19.23 to $29.27. It is also trading at high volume. The market is a bit shaken, and no wonder. The company has had four up revisions for its earnings forecast over the last four weeks alone. On average, the investing community has the company down as a HOLD. The consensus is a mean one-year target estimate of roughly $23 and expected growth over the next five years at 11% per annum, versus 15.55% for its industry.

I am much more bullish about Intel over the long term. The company is a great investment, but keep in mind that timing is key here. The company is pursuing a slow but steady strategy so don't expect huge returns over the short term.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.