Although Intel does rely on the PC market for a significant portion of its revenue, the company's mobile advancements, albeit modest, are a step in the right direction.
I'm not suggesting that rivals such as ARM Holdings
One of these small steps was taken recently when Samsung announced that it had chosen Intel's Clover Trail+ mobile chip processor to power a its Galaxy Tab 3, which is based on Google's
I won't discount that this would be a major blow to Intel, which is struggling to find its footing in the mobile market. But there are two frames of thought here. First, I believe the Street is still overstating Intel's reliance on the PC industry. Granted, this is an area where Intel owns a meaningful portion of market share. But the presumed "death of the PC" does not spell the death of Intel.
Second, investors are still discounting management's ability to adjust to the changing trend. Management has begun to reinvest in research and development, while laying down the foundation for the company's long term-success.
Accordingly, I believe that Intel has all of the makings of a successful turnaround story -- one that earned $2 billion in its most recent quarter (reported in April) -- meeting both its revenue and profit targets.
What's more, the company has begun to think differently, which means that investors must also adjust their views. Intel has begun to look for new revenue streams beyond its core competency. These include the home entertainment industry where the company has discussed the prospects of building a television. Say what you want about how competitive that space is. What is clear, though, is that management appreciates the new realities of "adapt of die."
Given these new ambitions, I believe it's premature to count Intel out. Along those lines, I still believe that Intel's true growth potential will reside in mobile. This is not to discredit management's goals in entertainment. But I don't believe that Intel's pedigree in home theater can rival what Apple and Google are able to do.
Plus, when you factor in Microsoft's
Though Qualcomm and ARM Holdings may be out of Intel's league at the moment. Intel still has distinct advantages over the likes of NVIDIA
The emerging markets are where most of the company's growth should be in the next few quarters. This is one of the main reasons that I'm bullish on Intel's core capabilities -- namely in areas like security and the cloud. What Intel needs is more time. The company will eventually recapture its magic and prove that is can increase its margins and outperform expectations.
In the meantime, from an investment perspective, I believe that the stock is trading for less than its fair market value, which I have estimated to be right around $32 per share. (Shares were changing hands Tuesday morning at $24.19.) For value investors with patience, the stock is a buy at this level ahead of earnings.
At the time of publication, the author was long AAPL.
This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.
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