On paper, chip maker Intel (
INTC
) today looks like a value investor's dream stock; a Dow company
sporting devalued shares, with a
PE ratio
below 9, and a 4.3%
dividend yield
even while running billions of dollars in quarterly profits. Then
again, computer maker Hewlett Packard (
HPQ
) looked pretty good for similar reasons not too long ago
also.
INTC
data by
YCharts
HP reached its inglorious position after years of uneven,
sometimes comically inept, leadership. Intel has no such
checkered past. But like HP, Intel is PC-dependent company
struggling to stay relevant in a mobile device world. And while
investors once had high expectations that Intel's inventive
genius would let it avoid an HP-like crash, those hopes are
fading. In fact, that 25% drop in Intel's share price over the
past six months represents the dawning realization that there's
little inside Intel likely to spark a rebound any time soon.
Intel derives some 85% of its revenues from the PC industry,
mainly by selling processors to PC makers like Apple (
AAPL
) and Dell (
DELL
). That industry is suffering a quick decline - PC shipments were
down more than 8% in the third quarter alone - although the
debate over whether this is an impending death rages. Intel cut
its third quarter revenue projections by about $1 billion ahead
of results in October. Its revenues are down some 5.45% in the
past 12 months.
INTC Revenue TTM
data by
YCharts
While Intel is top-dog in the PC chip market, competitors like
Qualcomm (
QCOM
) and ARM Holdings (
ARMH
) established huge beachheads with smartphone and tablet makers.
Intel finally got its first smartphone chips into a handful of
Android-based phones overseas this year. You still can't get one
in the U.S.
Meanwhile, some of the pillars supporting Intel so far are
looking weak. Apple Macs with their built-in Intel processors
actually report sales gains, but that relationship is in
jeopardy. Industry experts believe Apple wants to replace those
Intel processors with a version of the chip technology it uses in
iPads and iPhones. ARM, Qualcomm and Broadcom (
BRCM
) make Apple's mobile chips. Microsoft's (
MSFT
) Windows 8, the new operating system that might boost sales of
PCs with Intel inside, hasn't been the runaway success Intel
needs. Sales of Intel's own highly-touted Ultrabooks, a light but
powerful laptop meant to compete with tablets, also have been
disappointing.
Intel CEO Paul Otellini professes undying love for the PC
industry, and he recently blamed weak global economies, rather
than mobile intrusion, for missing revenue estimates. Investors
looking to capitalize on the rampant growth of mobile devices
probably will be disappointed by the PC drag at Intel.
Then again, no one else with any hand in mobile technology
will pay you a well-covered dividend that grows like this:
INTC Dividend
data by
YCharts
And perhaps that's quite enough. Intel, with its $100.79
billion market cap, $10.5 billion in cash and short term
investments, and $11.9 billion in earnings even in those lousy
past 12 months, make for an awful lot of protection against
really serious trouble. Just don't plan on selling those shares
any time soon.
Dee Gill is a contributing editor at YCharts, which
includes the just-released
YCharts Pro Platinum
for professional investors.