Intel Corporation (NASDAQ:INTC)'s fourth quarter results and first quarter outlook for 2013, which was largely anticipated, reflected the weak PC market. A research report from BAML, still gives a ‘buy’ rating to the stock, expecting its “2+ years in chip manufacturing to help in its transition to faster growth markets such as tablets, convertible tablet-Ultrabooks, smartphones and specialized foundry services.” The new markets, which are significantly more competitive, will witness a battle between Intel, TSMC and Samsung Electronics Co., Ltd. (LON:BC94) (KRX:005930). The report expect Intel “to win its meaningful share.” Intel’s sales are expected to boost in the second half of 2013 from enterprise data center recovery, economic growth in emerging markets and sales of Windows 8.
Focusing on earnings, despite a drop in the utilization level to 50 percent, its gross margins stood at 58 percent in the fourth quarter (better when compared to previous downturns). Lower utilization levels reduced inventory by 11 percent, and days dropped to normal levels of 76 days from 98 in the September. Sales from its data center improved 7 percent on a quarterly basis, helped by a richer mix and sales in China. The report expects DCG growth to continue into 2013 from the launch of 22nm Ivy Bridge architecture based Xeons.
For 2013, the chip maker announced CAPEX to $13 billion or up $2 billion from 2012, against the expectation of a $2 billion cut. Increased CAPEX for 2 straight years has caused a 300bp increase in the depreciation burden for 2013 as compared to 2011, with potential for more headwinds if the PC market remains soft. OPEX is expected to exceed sales for the second consecutive year.
In the fourth quarter, Intel Corporation (NASDAQ:INTC) repurchased 47 million shares for $1.0 billion through its stock buyback program, bringing the cumulative total shares repurchased to 4.3 billion. Still, about $5.3 billion of the total authorized stock buyback remains outstanding.
The semiconductor company's guided first quarter revenue is to be around $12.7 billion (+-$500 million), is in line with historical data, but below the Street’s estimate of $12.9 billion. Intel also predicted an amortization of $75 million, depreciation of $1.7 billion and a tax rate of 17 percent. The tax rate of 17 percent includes R&D tax credit for the first quarter and the retroactive credit for 2012, a report from Wedbush says “the midpoint of Q1 guidance implies EPS of about $0.44 above the Street and our estimate of $0.39.”
Intel Corporation (NASDAQ:INTC) noting the trend for thinner, lighter, and convertible hybrid, highlighted its Ultrabook momentum with over 140 Core-based design wins in 2012 up from about 20 designs in 2011. The company showcased ATOM-based tablets with great user experience, long battery life, high performance, and compatibility. The chip maker also made its presence felt in the smartphone market with 7 design wins.