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Of all the technology giants that missed out the recent high technology rally, one stands out: Intel (NASDAQ:INTC). The company’s stock is down 8 percent for the last 12 months compared to a 12 percent gain of Qualcomm’s stock and an 18 percent gain for NASDAQ (NASDAQ:QQQ); and is trading well below its 200-day moving average. But is this about to change? Is Intel turning the corner?
We should know in a few hours, as the company reports earnings. Analysts’ estimates vary from 47 to 54 cent, but they are looking to see whether the company’s margins are expanding or contracting; and whether its anemic sales growth will head north or south.
| Company | Intel | Texas Instruments | Qualcomm | Broadcom |
| Forward PE | 10.11* | 13.90* | 14.43** | 10.72* |
| Operating Margins | 31.23% | 22.47% | 31.77% | 11.38% |
| Qrtly Revenue Growth (yoy) | 3.60% | -3.60% | 27.70% | 10.30% |
| Qrtly Earnings Growth | -4.30% | -33.60% | 16.60% | -8.60% |
*Fye Dec 31, 2013
*Fye Sep 25, 2013)
For years, Intel has been among the most favored technology companies on Wall Street, as it delivered superior results. Recently, however, Wall Street has been disenchanted with the company and its equity performance. Though it continues to be an innovative powerhouse, it seems to have missed out on the transition from a PC to a mobile devices world. Perhaps, Intel has been too busy following its long partner Microsoft (NASDAQ:MSFT), which has also missed out this transition.
Early last month, Intel lowered its 3rd-quarter revenue guidance by 7.7 percent, citing a “challenging macroeconomic environment.” Does this statement ring any bells?
If my memory is correct, that’s the statement Cisco’s (NASDAQ:CSCO) CEO John Chambers used in the early 2000s to describe a slow-down in the company’s growth in the aftermath of the Dot.com crash. The trouble, however, is that ten years later the Dot.com crash is distant memory, but Cisco has yet to regain its growth momentum. This confirms that Cisco’s problem wasn’t macroeconomic but microeconomic, as I discussed in a previous piece.
To be fair, Intel, is, indeed, facing a sluggish world market environment at this point, especially in Europe, which is in a recession. The same is true, however, for Apple (NASDAQ:AAPL) and Qualcomm (NASDAQ:QCOMM). Yet the two companies are thriving, especially Qualcomm that cannot produce fast enough because they ride the right trend—they are in the right business at the right time. Intel has been trying to catch up, but not fast enough.
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