What is Haswell?
Haswell is the name for Intel Corporation (NASDAQ:INTC)’s latest and greatest processor. In light of Intel’s ‘tick-tock’ model, Haswell is the ‘tock’ which means that the processor features new microarchitecture, but is based on the same 22nm technology process as its predecessor, the Ivy Bridge. In layman’s terms, what this means is that thanks to the new microarchitecture, Haswell is remarkably better than its predecessor in three ways:
– It offers better performance in terms of more processing power
– It features an enhanced, integrated GPU
– It is highly power efficient
How will PCs come back to life?
In addition to the shift towards tablets, other reasons for the sluggishness in the PC market include a poor macroeconomic environment combined with a lack of availability of compelling products, which reduces the incentive to upgrade existing PCs for corporate and non-corporate consumers. Haswell represents one of Intel’s most significant processor upgrades in years, and will entice consumers to upgrade their laptop and notebook PCs by offering outstanding processing power and GPU performance, while at the same time giving users significantly improved battery life on their laptops and ultrabooks.
Due to its power efficiency, Haswell will enable OEMs to design slim and thinner form factor devices at affordable prices, and is expected to give a big boost to the ultrabook lineup thanks to its outstanding power efficiency. On the Q1 earnings call, Intel Corporation (NASDAQ:INTC)’s outgoing CEO Paul Otellini told investors that by the time the holiday season arrives, consumers would be able to purchase high performance, touch enabled ultrabooks at compelling, mainstream price points of around $499-$599, which should also drive PC demand. Otellini said that an improving global economy would give an additional boost to Haswell-based PCs in the second half of the year.
An bbvious beneficiary
The other major name in PC industry, Microsoft Corporation (NASDAQ:MSFT), is also expected to benefit from the increased PC demand driven by Haswell. Microsoft Corporation (NASDAQ:MSFT) has also been blamed for exacerbating the recent slump in the PC industry as its Windows 8 failed to live up to expectations. Microsoft’s latest OS was designed with touchscreens and tablets in mind, but has got a lukewarm response from PC users so far due to its steep learning curve over Windows 7.
A new report from the Financial Times claims that Microsoft Corporation (NASDAQ:MSFT) has realized that it got it wrong with Windows 8 and will release an update later that includes changes that will make it easier for PC users to adapt to the new OS. An update to Windows 8, the upcoming Haswell processor, and the expected price cuts to Windows latest OS are all good signs for the revival of the PC industry that should benefit both Intel and Microsoft in the second half of the year and beyond.
This PC name isn’t so happy
One of the biggest improvements that Haswell brings with it is its GPU. Intel says that Haswell can deliver up to twice the graphics performance as compared to its predecessor. Technology website Anandtech says that this is the first time that Intel’s built in GPU can be directly compared with those made by dedicated GPU maker NVIDIA Corporation (NASDAQ:NVDA). In fact, Intel’s top end configuration for Haswell will be able to directly compete with NVIDIA’s GeForce GT 650M.
This is a big negative for the graphics chip maker because it reduces, and to some extent eliminates, the need for separate graphics cards to enable high performance gaming and video playback on PCs. Although NVIDIA has reduced its exposure to the PC gaming market with its Tegra System On Chip (SOC) processors for mobile, I can see NVIDIA Corporation (NASDAQ:NVDA) taking a hit on its GeForce sales as Intel Corporation (NASDAQ:INTC), with Haswell, increasingly becomes a direct competitor to NVIDIA Corporation (NASDAQ:NVDA)’s graphics cards business.
Foolish take
The time to buy Intel is now. The sentiment around PCs is at an all-time low and many investors are underestimating the impact that Haswell can have on Intel’s prospects and on the PC industry as a whole. In the Q1 earnings report, Intel Corporation (NASDAQ:INTC) reported a gross margin of 56%, but for the full year, Intel maintained its gross margin outlook of 60%, which means that management expects a lot more upside in the second half of the year.
Intel Corporation (NASDAQ:INTC) currently trades at a forward 2014 P/E multiple of just 11.9 times. Going by historical P/E ratios, Intel’s price-to-earnings multiple can easily expand to 12.5 times. With an expanding valuation multiple and rising earnings estimates thanks to Haswell, Intel can deliver strong returns in the coming months and years.
The article This Tech Giant Has an Amazing New Product originally appeared on Fool.com and is written by Zain Zafar.
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