(Repeats Oct. 19 story for wider readership)
* Buyback fund, dividend catch investors' eyes
* PC outlook, mobile market still weigh
* Stock up 3.6 after earnings beat
By Noel Randewich
SAN FRANCISCO, Oct 19 Record earnings, a
better-than-expected outlook and potential to buy back $10
billion in stock have put some shine back on the world's top
chipmaker although investors are wary of jumping in for the
Stock in the world's largest chipmaker has lagged its tech
counterparts, punished by fears the longtime PC gargantuan is
being left out of the mobile device boom. But stellar earnings
this week lent credence to its argument that the PC market is
still growing at a healthy rate.
The question is for how long. At least for now, the Street
is giving Intel -- which hopes to get into mobile devices
through its new Ultrabook initiative -- the benefit of the
Investors a little less worried that tablets and a shaky
economy are eating in to demand for personal computers pushed
Intel's stock up 3.6 percent on Wednesday, bringing its gain
this year to 16 percent, but it still looks cheap compared with
other tech companies.
"The reason the multiple isn't greater than it is is there
isn't the sizzle of the next iPhone or the next iPad, that
market-expanding opportunity into future, more touch-friendly
devices," said JMP analyst Alex Gauna, who recommends the
The Santa Clara, California company's earnings and outlook
beat expectations on Tuesday, as has become common in recent
quarters, with demand for China helping offset weakness in
Europe and helping deliver record cash flow. [nN1E79H1RV]
Intel also authorized $10 billion to buy back shares, which
currently pay a dividend yield of over 3.5 percent.
For analysts Intel price target changes: [ID:nL3E7LJ0WP]
Graphic on quarterly tech earnings:
Shares of Intel trade at 10 times earnings, lower than an
average of 14 for tech companies but better than
Hewlett-Packard Co (HPQ.N) and Dell Inc DELL.O, which also
depend heavily on PC sales pinched by a lackluster economy and
the growing popularity of tablets.
One of a handful of analysts who do not recommend buying
Intel, CLSA's Srini Pajjuri is concerned that the company's
outlook for personal computer sales has been consistently
higher than forecasts by market research groups in recent
"My best guess at this point is that there's an inventory
build somewhere. Within the next one to two quarters I expect
Intel (earnings) to underperform the market."
Intel's processors are used in 80 percent of the world's
PCs but the company has failed to gain traction in mobile
gadgets like Google Inc's (GOOG.O) Android smartphones and
Apple Inc's (AAPL.O) iPad.
Chips made by Samsung (005930.KS), Texas Instruments
TXN.N and Nvidia (NVDA.O) using an energy-efficient
technology licensed by Britain's ARM Holdings (ARM.L) dominate
the smartphone and tablet market.
Proponents of ARM say its power-sipping architecture used
to design its chips gives such a large advantage that Intel
will be unable to dominate the mobile market. Competitors also
plan to make inexpensive ARM chips for PCs -- challenging Intel
on its own turf.
Intel says its formidable lead in manufacturing technology,
letting it pack more transistors onto a silicon chip than its
competitors can, will eventually allow it to deliver superior
processors for mobile devices.
Concerns that ARM, tablets and other mobile gadgets will
decimate the PC market dominated by Intel, or at least cut in
to the chip giant's margins, are a key factor weighing on many
Intel is promoting Ultrabooks, a new super-thin category of
laptops using Intel processors -- similar to Apple's MacBook
Early Ultrabook models, meant to combine the best features
of tablets and laptops, may seem expensive to consumers,
analysts say. But as they get new features, such as
touchscreens and "instant on" capability, Intel expects the
Ultrabooks to account for 40 percent of the consumer PC market
by the end of next year.
Gauna said it is tough to predict how technology advantages
in the mobile market will play out down the road but sees
Intel's dependable cashflow and investor-friendly share buyback
and dividends as reasons to own the stock now.
"I don't need the tablets or iPhones to make this an
attractive investment today," he said.
(Reporting by Noel Randewich, editing by Matthew Lewis)
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