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Intel Corporation (INTC), QUALCOMM, Inc. (QCOM): Should You Take This Company’s Words With A Pinch Of Salt?

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For any company, merely possessing the best of technology required to deliver the latest products is not enough until and unless you have takers for those products. As things stand at present, that’s something which is certainly applicable to chip behemoth Intel Corporation (NASDAQ:INTC), as the company is still swimming against the tide in a world that is witnessing a rapid decline of personal computers. As pc shipments continue to move southward for the fifth consecutive quarter, Intel Corporation (NASDAQ:INTC) finds itself way behind with regard to adoption of its processors in mobile devices such as smartphones and tablets.

Intel Corporation (NASDAQ:INTC)

The fact that Intel Corporation (NASDAQ:INTC)’s third quarter revenue projections have stayed behind analyst estimates and that too after four rounds of consecutive quarterly sales declines is certainly a firm indicator of bad times that will continue to plague the company for quite some time to come. And even though competitors such as QUALCOMM, Inc. (NASDAQ:QCOM) and its licensor ARM Holdings plc (ADR) (NASDAQ:ARMH) do have their own share of problems, this ensures that their dominance in the realm of chips for mobile devices is unlikely to be challenged in the near term.

Perplexing but sad

The sad thing about the whole scenario is that Intel Corporation (NASDAQ:INTC) remains unsuccessful in the chips for mobile devices arena, despite having massive advantages over its relatively smaller competitors. This is because it is probably the only chip manufacturing company in the entire planet that has its own production factories, or ‘foundries’ as they are known as in tech parlance. And it’s also way more cash-rich than competitors such as QUALCOMM, Inc. (NASDAQ:QCOM) and NVIDIA Corporation (NASDAQ:NVDA) who incidentally, have to depend on third-party chip manufacturers such as Taiwan Semiconductor Mfg. Co. Ltd. (ADR) (NYSE:TSM) (TSMC) to fulfill their order-based requirements. At the same time, companies such as Taiwan Semiconductor Mfg. Co. Ltd. (ADR) (NYSE:TSM) are no match for Intel Corporation (NASDAQ:INTC), with relation to the latter’s ability to incorporate the latest nanometer technology on its production lines. But, as I said, the problem is that Intel Corporation (NASDAQ:INTC) has few takers for its advanced chip products.

That’s something which again forces us to think about the possibility of a large part of Intel’s production capacity lying idle. While management vehemently denies this and claims that utilization levels continue to be ‘healthy’ without divulging further details, people like me continue to have their reservations.

A lot of good stuff as well

As is evident from my previous article, it’s not as if I’m completely bearish on Intel and have given up all hopes about the company’s revival. In fact, I continue to think that two of the best things to have happened to Intel in recent times comprise its ‘Atom’ line of chips and its new CEO, Brian Krzanich, who has displayed a new degree of transparency and openness in attitude, all of which should be heartening for Intel loyalists. For instance, under his leadership, Intel’s management has scaled down its future plans for massive investment into plants and equipment by a substantial $1 billion, bringing it down to around $11 billion. While that’s certainly discouraging in some respects, it’s also a much-needed realistic stance given as things stand at the moment.

At the same time, the Atom design variations have helped the company to shed its perceived ‘high performance at the cost of high power’ image, a thing which should go down well with mobile device manufacturers and wireless providers, both of which comprise it’s priority target segments.

It’s a chip story

Intel’s entire line up of chips or processors can be broadly categorized into the Core range meant for personal computing devices and the Atom range focusing on mobile devices such as handsets and tablets. While Core processors have much higher profit margins, their demand has dropped sharply in sync with the sinking fortunes of the pc industry.

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