This Day On The Street
Continue to site
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Intel Still Seeking Next Big Thing

NEW YORK (TheStreet) -- Intel (INTC - Get Report) missing on earnings is no longer big news.

But now it's getting embarrassing.

Just 40 years after co-founder Gordon Moore wrote his famous article detailing how microprocessors would change the world, the company is losing its niche and walking right into a market that Google (GOOG - Get Report) wants, the Internet of Things.

Intel rose to fortune by holding the center of the market, the PCs and servers that were computing's middle class. But PC sales were flat year over year in its latest report, and server sales are not as strong as the company predicted, growing 8% year over year, as cloud expands the high end of the market using commodity chips, and devices take the low end.

Intel remains a sales and profit machine. Full-year revenue was $52.7 billion, net income was $9.6 billion, or $1.89 a share. Intel said it generated $20.9 billion in cash from operations, paying $4.5 billion in dividends, and used another $2.1 billion to repurchase 94 million shares of its stock.

Sounds great, but revenue was actually down 1% from 2012 levels. Gross margins were down 2.3%. Net income was down 13%.

Moore's Second Law demands more.

This is the flip side of the original Moore's Law. While chips grow more complex each year, they also get more expensive to design and get into production.

This means Intel must constantly grow just to stay in place. With Intel having mainly missed most of the device boom to products based on ARM Holdings (ARMH) designs, it needs a hit to justify its increased capital expenses.

Intel was a phenomenal growth stock in the 1990s, but now is mainly a yield play. Its 22 cent-a-share dividend gives it a yield of 3.4%, and the stock buybacks mean earnings per share will rise even if actual earnings fall, because there are fewer shares.

To keep earnings going, Intel is now having to cut some corners. The company is delaying the opening of a new Arizona factory once held up as a model of American ingenuity by President Obama. Intel said it will upgrade other factories instead.

Intel's answer to its growth problem is Edison, a PC the size of a camera's memory card that is designed to start a whole new class of "wearable computing," announced by Intel CEO Brian Krzanich at the Consumer Electronics Show.

1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
SYM TRADE IT LAST %CHG
GOOG $637.61 1.43%
INTC $27.72 1.54%
AAPL $112.92 2.94%
FB $89.73 2.91%
TSLA $242.99 8.07%

Markets

Chart of I:DJI
DOW 16,654.77 +369.26 2.27%
S&P 500 1,987.66 +47.15 2.43%
NASDAQ 4,812.7080 +115.1720 2.45%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs