Terrible day for PC stocks—and it’s pretty much all Microsoft’s (MSFT) fault.
You see Microsoft’s new Windows 8 operating system—the big redesign with a touch screen—was supposed to revive PC demand.
And it hasn’t. In fact it looks like Windows 8 has made a bad situation worse as the redesign has driven away—or at least delayed their purchasing decisions–the corporate customers that are the remaining mainstay of PC demand.
At least that’s the conclusion from market watchers IDC and Gartner. IDC’s newest data, released yesterday, show worldwide PC shipments falling 13.9% during the first quarter from the level of the first quarter of 2012. Gartner’s numbers are only slightly less grim with the company estimating an 11.2% drop.
It’s not just that the numbers are so bad—it’s that they are so much worse than they were supposed to be. Read more
I don’t think it’s wise—or profitable—to ever underestimate Intel’s (INTC) patience. Recent product announcements and news on design wins show that the company continues its long-term attack on markets where Wall Street seems to have concluded that Intel can never win. (Intel is a member of my Dividend Income portfolio http://jubakpicks.com/jubak-dividend-income-portfolio/ It pays a 4.2% dividend.)
“Never” is a long, long time.
First, Intel announced a slight upgrade on its Atom chip—the Z2580–at February’s Barcelona Mobile World Congress and that was almost immediately followed by news that China’s ZTE, the fourth biggest seller of mobile phones in the world, has decided to use it in some of its new phones. This is an important follow up to Intel’s win with the Motorola Razr I phone last year. Intel still doesn’t have a central position in mobile phone silicon but it is no longer completely locked out of that market and the company even has some momentum. The Atom Z2580 does look like it has closed some of the graphics gap with chips from ARM Holdings (ARM.LN in London and ARMH in New York.)
Second, Intel has beaten out Taiwan Semiconductor Manufacturing (TSM), the largest independent chip foundry in the world, to build chips for Altera (ALTR), a leader in field programmable gate array technology. Read more
When I added Intel (INTC) to my dividend income portfolio on January 11 http://jubakpicks.com/2013/01/11/reformatting-my-dividend-income-portfolio-for-a-period-when-dividend-investing-gets-more-important-and-tougher-too/ , I wrote that the stock had tumbled in the last twelve months on fears of the continued slowdown in the PC market. And I said that I saw signs that Intel’s foundry business, the business of making chips for other chipmakers, was starting to pick up speed. The growth of that business could transform the way investors thought of Intel again, I added.
Well, both those trends, the bad and the good, have been in evidence in the last few days.
On January 17, after the close of the New York markets, Intel reported fourth quarter earnings of 48 cents a share, 3 cents a share above the Wall Street consensus, on revenue of $13.48 billion (versus the $13.53 billion consensus.) Gross margins in the quarter came in at 58% against the company’s guidance of 57% (plus or minus two percentage points.)
As expected, it was the PC group (63% of revenue) that killed the quarter. Revenue from that unit at Intel fell 1.5% from the third quarter and dropped 6% year over year. Those numbers are worse than they seem since Intel’s PC business traditionally reports 5% to 7% revenue growth in the fourth quarter.
Guidance for 2013 wasn’t any worse than Wall Street had expected, but no better either. Read more
It was as much of a surprise as Apple’s (AAPL) earnings miss. On October 18, after the New York market closed, Intel announced third quarter earnings of 69 cents a share, 6 cents a share above the Wall Street consensus.
And the biggest contributor to Intel’s surprise was its PC chip group, which contributed $4 billion in pre-tax profit. The company’s unit focused on servers and cloud computing added $1.2 billion in pre-tax profits. And Intel’s chip group that produces low-power chips for tablets, embedded processors, and smart phones turned in a $140 million loss.
Revenue climbed 28% from the third quarter of 2010 to $14.2 billion. Analysts had been looking for revenue of $14.23 billion.
The strong performance in the data center and cloud-computing segment was expected. Growth rates in both markets are strong and Intel has aggressively pushed new generations of server-chips in the market. Its new server chip, the Xeon E5, is due to go on sale in early 2012.
But Wall Street analysts had projected much less revenue and much lower earnings growth for the PC chip unit as PC growth slowed under the dual pressure of a slowing economy that has kept consumer sales down and on a shift from PCs and laptops to tablets and smart phones.
That shift wasn’t in evidence this quarter. Read more
Lot’s of rumors and news floating through the market on Intel (INTC). I don’t think most of it has any real import for investors. It’s certainly irrelevant to anyone who bought shares of Intel for their high dividend way back last fall when I added it to my Dividend Income portfolio.
Then the shares traded at $18.87 and yielded a high (especially for a technology stock) 3.4%. Today, May 6, the stock trades at $23.52 and yields just 2.89%.
That’s a hefty 24.6% gain since September 17. But because of that gain the yield is no longer high enough to make the cut for my Dividend Income portfolio and I’m dropping it from that list with today’s revision of that portfolio (http://jubakam.com/2011/05/when-markets-get-bumpy-thoughts-turn-to-dividends-of-course-you-should-be-thinking-about-dividends-all-the-time-my-dividend-income-portfolio-is-a-good-place-to-start/ )
The recent buzz is a result of Intel’s announcement of a new 3D chip technology. Read more