Intel (INTC) warned markets on September 7 that it would not meet revenue guidance. The lowered revenue guidance confirms the worst for the PC market: sales are dropping.
Over the last few years, Intel met or beat forecasts and improved margins each time. The negative outlook this time could mean a number of things:
1) Weak computer sales are due to the weak global economy, notably Europe and China
2) The PC market is facing sustained competition from the tablet market, marking a growing decline in PC sales
3) The weak outlook is temporary: Consumers are holding back purchases, waiting for Microsoft (MSFT) Windows 8 in the Fall.
In its news release, Intel said that revenue will be $13.2 billion. It previously guided $13.8 billion to $14.8 billion. Intel customers were reducing inventory in their supply chain.
Is this a trend you can play? Absolutely. Here are some ideas:
The warning hurt chip makers. Buying opportunity?
1. Intel Corporation (INTC, Earnings, Analysts, Financials): Engages in the design, manufacture, and sale of integrated circuits for computing and communications industries worldwide. Market cap at $116.02B, most recent closing price at $23.19.
2. Advanced Micro Devices, Inc. (AMD, Earnings, Analysts, Financials): Operates as a semiconductor company in the United States, Japan, China, and Europe. Market cap at $2.75B, most recent closing price at $3.89. AMD is Intel’s main competitor, but has had difficulty matching Intel’s profit margins.
3. NVIDIA Corporation (NVDA, Earnings, Analysts, Financials): Provides visual computing, high performance computing, and mobile computing solutions that generate interactive graphics on various devices ranging from tablets and smart phones to notebooks and workstations. Market cap at $8.42B, most recent closing price at $13.59. The graphics maker relies on a strong PC market for the sales of its desktop graphics card.
4. Micron Technology Inc. (MU, Earnings, Analysts, Financials): Engages in the manufacture and marketing of semiconductor devices worldwide. Market cap at $6.58B, most recent closing price at $6.47.
Computer makers were also hurt after Intel’s warning. HP recovered somewhat:
5. Hewlett-Packard Company (HPQ, Earnings, Analysts, Financials): Offers various products, technologies, software, solutions, and services to individual consumers and small- and medium-sized businesses (SMBs), as well as to the government, health, and education sectors worldwide. Market cap at $35.47B, most recent closing price at $17.99. HP announced an all-in-one desktop called “Spectre.” The system will have a touchscreen and offered with either AMD or Intel options. Availability varies between October and November.
6. Dell Inc. (DELL, Earnings, Analysts, Financials): Provides integrated technology solutions in the information technology (IT) industry worldwide. Market cap at $18.46B, most recent closing price at $10.64. Dell’s XPS 13 will have Nuance’s Dragon Assistant software loaded on its ultra book.
The claim that the PC market is in permanent decline is not entirely true. Corporations will always need to refresh their computers, consumers still need laptops and desktops to work, and the new Windows 8 tablet/operating system brings renewed interest in them.
During the Intel Developer Forum, Intel introduced a miniature PC only 4” x 4” in size. Ultrabooks will have voice recognition software powered by Nuance Communications (NUAN). Finally, the next-generation processor will use 95% less power than Intel’s existing Ivy Bridge processor:
7. Nuance Communications, Inc. (NUAN, Earnings, Analysts, Financials): Provides voice and language solutions for businesses and consumers worldwide. Market cap at $7.65B, most recent closing price at $24.86. Ultrabooks will have a beta of Dragon Assistant. Users will be able to load tasks like playing music or searching the web.
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