I’ve heard some bearish comments lately on my favorite tech play, Intel Corporation (NASDAQ:INTC). These comments generally have to do with the declining demand for PC’s and questions about whether or not Intel can adapt to the changing computing landscape, particularly the shift toward tablet computing and other mobile devices.
One of my general philosophies about investing is that uncertainty creates bargains. It is this philosophy that allowed savvy investors to buy shares of Green Mountain Coffee Roasters Inc. (NASDAQ:GMCR) for under $20 when the market was uncertain of the effect of the K-cup patent expiration, and sell them for over $40 when the next earnings report confirmed the company is still strong. I believe that Intel is a similar situation, though it may take a little more waiting in this case.
Intel Corporation (NASDAQ:INTC) has traded relatively flat over the past decade or so. In fact, exactly 10 years ago from the time of this writing, Intel Corporation (NASDAQ:INTC) was trading at $19.56, meaning that the shares themselves have risen just 10% in a decade. There have been some pops and drops since then, and a year ago Intel was approaching $30 before pulling back. However, in the past decade Intel has incrementally raised its dividend from 8 cents per share to 90 cents per share. At a current yield of around 4.2%, Intel has become quite a nice income stock.
Despite its labeling as a value and income play, I think Intel Corporation (NASDAQ:INTC) may be ready to break out to the upside over the next several years. For a long time now, the microprocessor industry has been completely dominated by Intel and Advanced Micro Devices, Inc. (NYSE:AMD). Advanced Micro Devices, Inc. (NYSE:AMD) spend most of the early 2000’s improving their products and cutting prices and Intel suffered as a result. Intel, however, began to regain its market share when it introduced the “core” line of processors, the i3, i5, and i7 that are so popular for PC’s and laptops.
Intel has always been the clear leader, and it currently accounts for about 80% of microprocessors shipped worldwide. While thus far Intel has not been able to really break into the mobile segment, I believe it is just a matter of time.
As tablet computers and mobile devices such as smartphones add more features and capabilities, the need arises for more powerful and capable processors. Intel Corporation (NASDAQ:INTC) has the Atom processor, which is much faster than most mobile processors; however the challenge is power consumption, an area in which Intel has not been too competitive thus far.