Why Intel has failed to tap the mobile market growth

Market Realist

Overview: What to expect from this week's tech sector earnings (Part 3 of 8)

(Continued from Part 2)

Mobile and tablet market showing better growth than PC market

In the previous part of the series, we discussed why Intel (INTC) raised its revenues and gross margin outlook for the second quarter. After Microsoft (MSFT) announced the end of Windows XP support, it led to a personal computer (or PC) refresh cycle from businesses that helped Intel. Although the PC market’s performance was better than expected in 2Q14, the overall growth rate was largely flat. The real growth is coming from the smartphone and the tablet market. According to another report from Gartner, the mobile phone market could increase by 3% and tablet market could increase by 24% in 2014. In absolute terms, the mobile market is more than six times that of PC market.

Intel has set some aggressive goals to tap into mobile and tablet market growth

Intel has failed to tap into this growth until now. However, it has set some aggressive goals for itself in this market. Intel has set a goal of shipping 40 million tablet chipsets by the end of the year. According to the management, Intel has tallied more than 90 designs on Google’s (GOOGL) Android and Microsoft’s Windows tablets. It has already shipped five million units in the first quarter.

SoFIA, which is Intel’s first integrated apps processor and baseband for tablets, is on track to ship late this year. SoFIA is specifically designed for cheaper tablets at $250 or below, as the majority of tablets sell in that price range. At the Mobile World Congress in February, Intel announced multi-year multi-device agreements with Lenovo (LNVGY), Asus, Dell (DELL), and Foxconn for providing chipsets for their tablets and smartphones.

Intel’s stock unlikely to gain much after second quarter earnings

Better-than-expected PC sales helped Intel’s stock increase by 19% in the second quarter. However, it’s highly unlikely that the stock will gain much more after the second quarter earnings are announced, as it has already priced-in the Intel’s revised guidance. The only way Intel’s stock can gain on the day of earnings announcement is if its efforts to penetrate the fast growing mobile and tablet chipset market materialize. However, by company’s own admission and as discussed above, Intel’s efforts to penetrate this market can only materialize by the end of this year.

Continue to Part 4

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