(Continuing from: "Will Intel Corp (INTC) Thrive in a Fading PC World?")

  1. Favorable Catalysts

The writing is on the wall: The PC as we know it today is dying a slow death. According to findings from international research firm, IDC, Q3-2012 PC shipments fell 8.6% from Q3-2011. In the coming years, this void in PC sales will be filled by mobile devices like smart phones and tablets, in which Intel rivals like Arm Holdings (NASDAQ: ARMH) currently hold greater sway.

However, as mobile users start demanding more from their light-footprint devices, it will prompt service providers to gravitate more and more towards offering Cloud-based solutions, a model that is increasingly becoming popular especially in the corporate world. That will be INTC's moment to shine and emerge as a clear winner in the microchip domain. Cloud computing will boost the global demand for more servers with greater processing power.

This catalyst will provide a boost to INTC's server processor line of business, which now generates around 1/5th of its sales and accounts for approximately 1/3rd of INTC's operating income.  As an already dominant player in the server processor business, clearly there is room for growth in both sales and operating income.  


INTC management realizes that, for now, its Achilles heel is in the mobile chipset market. And that's why, to strengthen that side of the company, in 2011 the company acquired Infineon's wireless chip business for $1.4B. They also took over McAfee, the anti-virus giant, in a 2011 $6.7B deal, with the objective of integrating security in its chip technology.  Both these acquisitions could prove favorable catalysts in the long-term growth strategy for INTC.   

  1. Bottom Line Conclusion

In the near term, INTC may suffer some margin erosion to competitors like AMD and ARMH. A Bloomberg report, indicating that Apple may switch away from Intel chips for the Mac could also dampen INTC's growth plans. However, on the backs of the Cloud-computing revolution, the longer-term outlook for its growth looks positive. And given INTC's huge investment in R&D, which is capable of dwarfing that of any of its competitors, the company will continue to innovate its way to market dominance of the chipset market.

Based on this outlook, INTC would rate as a STRONG HOLD to a MODERATE BUY on weakness.

  1. Market Correction Impact

MarketConsensus would, however, like to caution investors on what we see as an imminent market correction. Market trend indicators are pointing to an overbought situation and investors should take this into consideration in their near term investing choices.

(By: Monty R. – MarketConsensus News Contributor)