Intel Corporation (INTC)’s $750 Million Investment Might Turn Sour: Brett Simpson

The slight bump in the stock price of Intel Corporation (NASDAQ:INTC) ater the release of its Earnings Report is only temporary.Brett Simpson, who is an analyst at Arete Research revealed on CNBC who the chip giant’s troubles are far from over.

Intel Corporation (NASDAQ:INTC) has been pumping money into the right sector, but it still remains to be seen whether it will be able to break in the mobile chip market. For this quarter Intel had set a target of 40 million chips for tablets which it met, but it might be unsustainable to continue to put so much money in the division in future to drive the sales.

 “[…] They have 1.5 percent of sales has been allocated for  contra revenues for that business, so essentially we think $750 million of incentives has been spent to try to drive this 40 million tablet number and I think the key question is that without that incentives what type of numbers can we see from mobiles […],” said Simpson.

Sure, Intel Corporation (NASDAQ:INTC)’s revenues also grew in this quarter but they were mainly because of the refresh period for corporate PC’s. However, the trend might not be seen going forward into the next quarter, given that the global economic outlook is glum with discouraging figures from Europe.

“[…] Commercial PCs is about half of the overall global PCs market and that refresh cycle has, we think, brought about a healthy but temporary recovery in this end market […],” said Simpson.

Hence, there is an urgent need for Intel Corporation (NASDAQ:INTC) to make inroads into the mobile chip industry which is an uphill task in itself. Simpson explained that Apple Inc.(NASDAQ:AAPL) and Samsung are two main market holders in this regard and while Apple makes its own chips, Samsung seems pretty contend with its Chinese chips from Media Tech.

Thus, Intel’s stock will feel the volatility of the current market conditions too, when investors realize what they have bought into is not a sure shot win.

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