Buy Intel Corporation (INTC) and Short ARM Holdings plc (ADR) (ARMH)?

Page 1 of 2

Intel Corporation (NASDAQ:INTC) has been left out of the spotlight. The blog sphere is alive with talk that the PC is dead, but there is healthy amount of hyperbole in that statement. While research firms are predicting that tablet sales will exceed PC sales, IDC still expects 333 million PCs to be sold in 2017. Dominating a market with 333 million unit sales is not a shabby prospect.

Intel ARM

The Mobile Sphere

In the mobile market Intel’s current partnership with Microsoft hasn’t turned out very well. Even Microsoft was forced to develop an ARM compatible OS, Windows RT. Intel’s mobile struggles have hurt the company’s pride, but its huge R&D budget means that it is only a matter of time before it starts to produce more competitive mobile products.

ARM Holdings plc (ADR) (NASDAQ:ARMH) has been a growth darling of the tech industry, but long term investors need to take a deeper look at the numbers. Yes, ARM is dominating the mobile market, but Intel Corporation (NASDAQ:INTC) is fighting tooth and nail to take some of this growth. For instance, Samsung recently announced that it will produce high performance Intel-powered tablets.

ARM Holdings plc (ADR) (NASDAQ:ARMH) is excited about developing 14nm FET technology as a way to squeeze more power and performance into smaller chips. It realizes that it needs to aggressively develop new products if it wants to defend its market share. With Intel expecting its 14nm products to be in production by 2014, the industry will be an excited place over the next couple years. It is important to remember the Intel has made huge fixed investments in its latest plants, and it needs to gain a larger portion of the mobile market to bring down unit costs.

The Financials


INTC Operating Earnings Yield data by YCharts

ARM Holdings plc (ADR) (NASDAQ:ARMH)’s profit margin of 22.0% and earnings before interest and taxes (EBIT) margin of 34.4% are better than Intel’s profit margin of 19.5% and EBIT margin of 25.7%, but both companies are very profitable. Intel Corporation (NASDAQ:INTC) has little debt, with a total debt to equity ratio of 0.26, while ARM has no debt. While many people look at Intel’s -15.0% one year earnings per share (EPS) growth rate, this number over-emphasizes short term elements as Intel’s one year revenue growth rate is only -1.2%.

Don’t Forget the
Foundries

As Intel ramps up its mobile operations, Taiwan Semiconductor Mfg. Co. Ltd. (ADR) (NYSE:TSM) is another company that will feel the heat. This company manufactures wafers and integrated circuit for third parties. Intel Corporation (NASDAQ:INTC)operates a vertically integrated model and if manages to eat up a sizable portion of the mobile market, then Taiwan Semiconductor Manufacturing would see less demand for its services. This is an important risk, as its ten largest customers accounted for 59% of 2012′s net sales.

Page 1 of 2
Comments
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

Reign of Terror: The 10 Most Ruthless Politicians in History

On the Move: The 10 Fastest Growing Businesses in 2015

Fast Money: The 10 Highest Paying Fast Food Restaurants

Mixing It Up: The 14 Best Music Mashups of 2014

Rito Pls Buff: The 10 Least Played Champions in LoL Season 4

10 Covers of Popular Songs that are Better than the Originals

Must See TV: The 9 Most Anticipated Shows of 2015

The 15 Biggest Box Office Bombs of All Time

10 Things The World Can’t Stand About Americans

Picture Perfect: The 6 Smartphones with the Best Cameras

The 10 Best Countries To Work In the World

A Profitable Day At The Track: 5 Tips For Betting On Horses

Tearing You Apart: 6 Bad Habits That Ruin Relationships

Learning on the Job: The 6 Biggest Mistakes Parents Make

Shopaholics Rejoice: The 12 Biggest Malls in the World

Fright Night: 10 Horror Movies Based on True Stories

Mach Mania: The 10 Fastest Jets in the World

Military Heavyweights: The 10 Countries with the Most Tanks

All In: The 7 Richest Poker Players in the World

Abracadabra: The 10 Best Magicians in the World

The 10 Richest Asian Countries in the World in 2014

Eyes in the Sky: 10 Things You Need to Know About Drones

Rising Stars: The 6 Best Silicon Valley Startups

Military Muscle: The 5 Most Advanced Armies in South America

All that Glitters: The 7 Most Luxurious Jewelry Brands in the World

5 Things You Didn’t Know About ISIS but Should

Empowering Your Money: The 5 Best Energy Stocks to Invest In

The 11 Best Android Apps You Can’t Get on iOS

The 10 Most Important International Conflicts in 2014

Mood Enhancers: The 20 Most Uplifting Songs of all Time

Lover Beware: The 8 Countries that Cheat the Most

Breath of Fresh Air: The 25 Countries with the Best Air Quality on the Planet

Singles Beware: The 8 Worst Mistakes Made on First Dates

Healthy and Happy: The 10 Countries with Lowest Healthcare Costs

The 6 Best Company Team Building Activities to Build Workplace Camaraderie

Ships Ahoy: The 10 Busiest Shipping Ports in the World

10 Productivity Tips to Save You Time and Help You Do More With Less

Grab a Bite: The Most Popular Fast Food Restaurants in America

Friday Night Thirst: The 10 Most Popular Cocktails in the World

The 6 Greatest Unsolved Mysteries We May Never Figure Out

7 Useless Products You Never Should’ve Bought

The 5 Reasons Why You’re Single and Miserable

The 7 Most Addictive Foods in the World We Can’t Stop Eating (Even Though We Should)

5 Amazing Places You Can Swim with Dolphins

The Top 7 Most Livable Countries In The World

The 10 Most Expensive Baseball Cards Ever Pulled From A Pack

The 5 Easiest Second Languages to Learn for English Speakers

Silver Spoon: The 6 Richest Families in the World

The 20 Countries with the Largest Prison Populations in the World

The Top 10 Richest Actors in the World

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!