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A Tech Juggernaut for Defensive Growth
Intel Corp (
) derives a substantial part of its revenue from its core business
of supplying next-generation microprocessors for computing on
laptops, tablets, servers, and storage devices. However, the
company sees key growth opportunities in supplying processors for
the world's rapidly growing smartphone and mobile computing
Intel has a worldwide staff of approximately 103,000 employees,
roughly half based internationally and the other half in the US.
Intel's stock has long been viewed as a core blue chip holding.
Long-term Intel shareholders have been handsomely rewarded by share
appreciation and regular quarterly dividend payouts.
Intel's business goals include maintaining and increasing market
share in its microprocessors business and continuing to lead
research and development (R&D) in semiconductor technology with
newer, faster, more energy efficient chips. The company's latest
strategic foray is to expand its applications across growth
technologies, such as mobile computing.
Chip design and manufacturing involves sustained investments in
engineering and R&D, as well as massive capital expenditures to
set-up manufacturing plants. The company's semiconductor segment
was traditionally linked to intrinsic business purchase cycles and
seasonality, but this trend is now being replaced by Intel's
expansion into more consumer-centric devices such as smartphones
and mobile computing.
In its second quarter of fiscal 2012, Intel made a splash with
its Ultrabook line and chips for tablets and smartphones, in
addition to solid execution in its data center segment.
For its second quarter ending June 30, Intel reported strong
Intel has consistently paid and increased its dividends, from
$0.40 cents per share in 2006 to $0.84 cents annualized in 2012
(based on its last four quarterly dividend payments of $0.21 per
share). Intel last raised dividends in the second half of 2011,
from $0.18 to $0.21, and has held dividends at that level.
With Intel shares hovering at around 23.22 as of September 17,
Intel delivers a 3.9 percent dividend yield, with a market
capitalization of $116.9 billion (roughly 2.6 times book
Demand for Intel's products is driven by economic growth and
pricing decreases. Prices of computing devices are getting more
affordable because of innovations in semiconductor and components
technology, and higher volume production.
Intel has consistently stayed on the cutting edge of its sector
and steadily expanded revenue and profits. Intel has also benefited
from significant growth in Asia and other emerging markets, and
their massive appetite for computers, laptops, servers and mobile
products. The company's gains in emerging markets, however, are
tempered by revenue decreases in mature markets, especially in
Europe, which saw a 2 percent drop in revenue contribution in the
second quarter of 2012.
Intel appears to be the unassailable market leader, as it gains
in markets within the Apple (
) ecosystem. Moreover, Intel has a clean balance sheet. The company
has aggressively bought back shares and is increasing annual
New smartphone products and
technology releases seem to come out monthly. Intel makes chips to
improve the performance for all of these products. The stock is
trading at a 10x price-to-earnings multiple, a good value
investment considering its stellar growth prospects. For 4 simple
tips on unearthing the most undervalued stocks, click here.
This article by Todd Johnson originally appeared on