Intel Corporation (NASDAQ:INTC) stock is on a roll once again, and there’s one big reason to believe the stock’s run can continue: mobile. Intel won’t dominate the mobile business overnight, but its new Haswell chip will allow designers to blend the lines between desktop, laptop, and tablet, giving the company a foothold in mobile. Then, it’s on to smartphones.
Playing from behind
Up until now, ARM Holdings plc (ADR) (NASDAQ:ARMH)-based chips have dominated tablets and Intel Corporation (NASDAQ:INTC) has been shut out. Apple Inc. (NASDAQ:AAPL)‘s newest full-sized iPad uses an ARMv7-based A6X chip and the iPhone 5 runs a less-powerful A6 chip. Apple’s giant market share in both product categories means ARM has a large market share in both tablets and smartphones.
But Intel Corporation (NASDAQ:INTC) has started to crack the tablet shell. Microsoft Corporation (NASDAQ:MSFT)‘s Surface RT used an ARM Holdings plc (ADR) (NASDAQ:ARMH)-based chip, but Intel powered the more advanced Surface Pro. On Monday, Samsung said its next generation 8-inch and 10.1-inch Galaxy Tab 3 will be powered by Intel’s Haswell chip. This is the kind of win Intel needs to begin gaining share in mobile.
There’s been strong momentum for Haswell across the industry, and more should be coming this week. Hewlett-Packard Company (NYSE:HPQ) senior vice president of consumer PCs Ron Coughlin said, “We are all in on Haswell,” and expects the convertible segment to pick up as manufacturers offer more form factors. Apple Inc. (NASDAQ:AAPL) is also expected to power the next-generation MacBook on Haswell. The Galaxy Tab 3 is the biggest individual win for Intel Corporation (NASDAQ:INTC), but there’s strong momentum overall into convertibles and tablets.
Intel stock needs mobile to succeed
When you look at Intel Corporation (NASDAQ:INTC)’s financials, it’s easy to see why Haswell and the transition to mobile is so important. The PC Client Group saw a 6% decline in revenue during the first quarter and the Other Intel Architecture Group — which includes tablets and smartphones — actually saw a 9% decline in revenue and only accounted for 8.5% of the company’s revenue.
The PC business isn’t going to die completely, but it’s in the midst of a long-term decline. The Data Center Group is growing slowly, but it’s not going to be a major growth engine like mobile could be.
The reason the Samsung win is so important is because it’s an Android-powered device. We can assume that Intel Corporation (NASDAQ:INTC) will benefit if Windows is successful in entering tablets and smartphones, but Apple Inc. (NASDAQ:AAPL) and Google Inc (NASDAQ:GOOG) still hold a vast majority of the mobile market share.
If Intel can crack into more tablets and leverage that into smartphones in the next few years, that will drive the stock. If not, investors are only looking at Intel stock for value.