Intel Doubt Train Should be Derailed (INTC, ARMH, AAPL)
Despite the recent run higher for Intel (INTC), a number of analysts continue to find reasons to doubt the tech giant’s long-term growth story. Next Inning Editor Paul McWilliams, whose model portfolio has outperformed the S&P500 by a ratio of nearly seven to one since 2002, believes the Wall Street is overlooking myriad growth drivers, or significantly overstating potential roadblocks to the industry stalwart’s opportunities both short and long term.
“It is important to understand where we are headed and what will drive future trends,” McWilliams said. “There are certain aspects of the semiconductor industry that are highly predictable, and I think that when you consider those and the position Intel has in key high growth markets, there is reason to believe Intel is at the front of a multi-year growth trend that is likely to extend for at least three to five years.”
Among the positive trends for Intel outlined in a recent Next Inning State of Tech report on Intel:
– Although a common criticism of Intel is that company hasn’t executed well enough over the past decade in its attempts to establish a position in the handheld computing sector (cell phones and tablets), such analysis ignores what has changed during the last decade. Due to the march of Moore’s Law, the size of the processor core has become less important relative to the size of the System on a Chip (SoC) favored by mobile applications. Between this and the fact Intel has driven down both he size and power consumption of its processors it is positioned for the first time ever to take on processors using cores from ARM Holdings (ARMH) head on. McWilliams predicts ARM Holdings license holders will maintain their lead in mobile markets, but will smartphone sales continuing to boom and consumers hungry for real processing power, Intel is positioned to make its mark in 2012.
– Some analysts are predicting the rapid demise of the PC, Intel’s core area of strength. While the emergence of tablet computers, a segment currently dominated by Apple (AAPL), could cannibalize some PC shipments in developed regions, the expansion of a consumer class in emerging economies like China, India and Latin America will increase the PC shipments enough to drive aggregate PC growth at a compounded annual rate of 10% to 15% during the next three to five years. In addition to this, McWilliams expects we’ll see evidence by year-end that Intel is destined to become a force in the tablet market.
– Intel continues to have a dominant position in enterprise markets, including workstations, networking, storage, and servers. After a couple of down years, corporations are entering refresh cycles for enterprise equipment, and as Japan moves into a rebuilding phase from the March natural disasters, enterprise equipment purchases in that region will likely move above normal shipment trends, McWilliams said.
“Analysts who are believe PC unit volume is destined to shrink going forward are dead wrong,” McWilliams said. “PC growth will be fueled not only by the spread of affluence to emerging economies, but also by Intel driving down the cost for entry level PCs to around $200. I also believe Intel will show traction in the tablet by the end of the year, and in the smartphone market during 2012.”
McWilliams has offered further insights on Intel, Apple, and ARM Holdings in recent weeks, and his special “Decade of Connections” report is a roadmap to the major technology trends that will dominate the landscape over the next several years. All of these reports are available for free to trial subscribers.
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