Despite tough macroeconomic conditions, Intel (
) posted strong Q2 2012 earnings with a 4% y-o-y increase in
revenues and was hopeful of slight growth in the current quarter as
Intel Weathers Soft PC Market With Healthy Q2
) On the contrary, some of the company's competitors such as AMD (
) registered a sharp decline in their Q2 2012 earnings, while
others such as Texas Instruments (
) posted a cautious outlook for the current quarter on account of
lack of visibility of orders from customers and distributors.
However, with Intel soon following suit by reducing its Q3 2012
revenue target by almost $1 billion, from $13.8-14.8 billion to
$13.2 billion, it looks like the current slowdown in the
semiconductor industry has yet to mark its bottom. The company also
reduced its forecast for its Q3 2012 gross margins by 1%, from the
previous estimate of 63%.
See our complete analysis for Intel
The slowdown in the global PC shipments growth rate has been due
to a combination of various factors - hard disk drive shortage due
to floods in Thailand last year, slow demand in developed
countries, a slowdown in demand growth from emerging economies and
macroeconomic headwinds in general. Additionally, with the
increasing adoption of smartphones and tablets around the world,
the growing sales of mobile devices has also cannibalized PC sales
to some extent.
Though Intel marked its entry in the coveted mobile computing
space, it has yet to make a significant impact in the market which
is heavily dominated by ARM-based players such as Qualcomm (
), Texas Instruments and Nvidia (
). We estimate Intel to derive over 85% of its value directly or
indirectly from the PC market. The company has been reining in the
PC microprocessor domain for the past two decades and continues to
account for a majority of the market.
We estimate Intel to register only a slight increase in revenues
in 2012, but forecast the same to grow at a robust rate for the
rest of our forecast period. We feel that the current slowdown is
more on account of the soft macroeconomic conditions and continue
to believe that Intel has strong fundamentals to support a higher
With the upcoming Windows 8 OS launch and the entry of ARM-based
players in the PC microprocessor market, we expect to see a revival
in PC shipments by the end of this year or early next year.
Research firm IDC forecasts PC shipments to grow at a mere 0.9 % in
2012 but estimates the worldwide PC shipment growth to average
around 7.1% from 2013-2016.
We have a
price estimate 0f $31.94 for Intel
, a premium of over 30% to the current market price.
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