In reviewing Intel's prospects going forward it is really only necessary to review two dynamics and three points to understand the big picture.
Big data is the driving force behind Intel's business. In 2010, internet traffic was estimated to be 245 exabytes (ten to the eighteenth power). By 2015 it will be 4 times this size and that's a conservative estimate.
Intel has recently revised up its estimates of those needing connectivity by a half-billion to a billion and a half more users. That's an estimate revised from the one just 12-18 months prior. The revised estimate is 3.1 billion people.
By 2015 it is expected there will be 15 billion devices connected to the internet moving to 50 billion by 2020.
Intel expects servers and revenues to double by 2015. Yet the earnings growth (which will be much higher than revenue growth) is currently projected at a tiny 4 percent for 2012 by analysts.
Intel is now rolling out Romley which is the fastest ramping product in Intel history as a part of a massive server refresh.
For much more information on this dynamic see the Intel slides from the Wells Fargo conference:
With tri-gate Intel has the most advanced fabrication technology in the world. Intel is the only company with this technology and expects to be for another 3 to 5 years. In addition Intel builds new fabs every eight quarters, featuring a major die size reduction, performance improvements, and power consumption reductions. Due to the extreme costs of each new fab ($7-10 billion) and the complexity, Intel is the only company on the planet that can maintain this pace of technological progress.
For much more information on this dynamic see the Intel slides from the UBS conference:
1.) The Intel stock price is currently under pressure due to macro events in the economy. However, Intel's financial performance is substantially determined by big data and big fabrication and not these macro events. 2.) ARM's current position in the mobility market is based exclusively on its power consumption advantage. This advantage will be eliminated in the next two years by Intel's fabrication ramp. 3.) The elimination of ARM's power consumption advantage will allow Intel to gain significant market share in mobility.
Intel is poised based on factors largely independent of general economic conditions to double revenues in the next five years.
Just in 2012 Intel will roll out Romley, Cedar Trail and Ivy Bridge.
The doubling of revenues will lead to a quadrupling of earnings over the next 5 years.
The summation of these factors would result in a triple digit stock price. A more normalized P/E ratio of 15 would add another 50 percent to the stock price from its current P/E of less than 10.
Uh.. Intel Server is 20% of Intels total Revenue and 30% of earnings. Even if Intel doubles its server revenue in 4 years (which it very well might do - given AMDs pathetic situation and if global economy holds up), the other 80% (lot of it is PC client group) has to keep pace for its total revenue to double in 5 years, like you predict. Do you see Intel to be a 110B Revenue company in 2016? Aint going to happen.
Stop pumping the servers. We all know they will do well there. But PC client will be a drag, with no more than mid to low single digit revenue growth.
"Do you see Intel to be a 110B Revenue company in 2016? Aint going to happen."
Indeed I think it's quite feasible. Let me review a couple of scenarios:
In 2011 Intel is projected to do $55 billion in revenue. And that in a year of pitiful PC growth just as you suggest. This however represents an $11.4 billion increase over 2010's $43.6 billion in revenue. If Intel can just achieve this same level of increase over the next five years it would add $57 billion to revenue, resulting in a total of $112 billion, or 2 more billion over what you refer to as "ABSOLUTELY IMPOSSIBLE".
Intel needs a 15 percent compounded sales growth rate to achieve a doubling of revenues in 5 years. The income rate growth for 2011 is projected to be 26 percent. So the bar is actually a lot lower for the next 5 years than what is currently being achieved.
There are other factors that might make the $110 billion level easier to reach:
1.) Acquisitions. Intel's recent acquisitions are adding a billion a quarter to revenues. If Intel made similar acquisitions have way through the 5 year period, they would add approximately $10 billion to revenue. That would reduce the need for existing operations to only reach $100 billion instead of $110 billion. 2.) New product areas. I can imagine entirely new product areas accounting for an additional $5 to $10 billion over a 5 year period of time. Intel seems to be expanding product lines for data centers at a significant rate. There are also a lot of embedded areas for potential expansion. ATMs, signs, e-commerce with Mastercard are just a few. 3.) Some of Intel's operations are expanding much faster than 15 percent a year. If servers for example expanded at 25 percent a year instead of 15, then they would be producing 45 percent of profits instead of 30 percent. I think the 15 percent figure for the server group is very conservative. All the datacenter numbers have been going up at a 25 percent rate. 4.) Those areas going up faster than 15 percent will help to offset those under 15 percent, such as the PC Group as you suggested. However I am more optimistic than you about PCs because of the 4 to 8 weeks of income dynamic covered in the Wells Fargo conference. There are a lot of nations that will be reaching that level by 2015 and it's going to expand PC sales. You should listen to the conference and review the slides if you haven't already done so.
So, this is my conclusion. An overall 15 percent rate of revenue growth is quite possible. Some sectors will be under this but those over 15 percent should make up the difference along with the new sources of revenues that I mentioned.
Even the 2009 to 2010 dollar increase in growth would add $43 billion in 5 years, resulting in a total of $98 which with new revenues would be higher.
Yes, it's quite possible given the big data and the big fabrication dynamics in play. Intel has huge drivers for growth and this is the greatest processor market in the history of technology. Processors are going into all aspects of society over the next 5 years.
But, let's assume I'm wrong by half just for grins. That would still equate to a stock price of $75. Frankly, I don't think anyone would change their investing decision or jump off any bridges at that level.
I rest my case. At least until your next rebuttal...