Intel Worth $27 No Thanks to iPad


Apple ( AAPL ) brought Intel (NASDAQ:INTC) on board to supply chips for its Mac notebooks ten years after running its own. Can we expect to see Intel processors in next generation iPads or iPhones? We think not. While Intel is the king of PC chips, the mobile market is much more competitive and since Apple has designed its own chips for the iPad, we don't see Intel getting a piece of this market anytime soon.

Our price estimate for Intel stands at $27.50 , implying nearly 30% upside.

If we look back, Apple had its laptop for nearly 10 years before moving to Intel chips with the MacBook Pro. During this growth period for Apple, Mac sales implied a missed opportunity for Intel chips.

So will we see the iPhone 5 or iPad 3 have Intel Inside?

Probably not…

The PowerPC processor was created by an alliance between Apple, IBM and Motrola ( AIM ) while Apple's current iPhone and iPad processors are its own. As such, we think that Apple is likely to continue with its own processors because they are performing well and allows Apple to earn higher margins on these devices.

Though Intel is far and away the leading chip maker for the PC market, it's not nearly as dominant in the mobile chips market. Therefore there is little incentive for Apple to shift to Intel until its chips can show much better performance.

Even if Apple shifts to third party-processors, there is no guarantee that Intel would gain this business given the formidable competition in mobile chips from other ARM-based players like Nvidia (NASDAQ:NVDA), Qualcomm (NASDAQ:QCOM) and Texas Instruments (NYSE:TXN).

Do you think differently? Let us know by commenting in the box below.

See our complete analysis for Intel's stock

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

This article appears in: Investing , Investing Ideas , Stocks , US Markets

Referenced Stocks: AAPL , AIM , AMD



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