Intel is likely to come in at the lower end of estimates in Q1 as a slump ion PC demand hits the company.
Intel Corporation (NASDAQ:INTC) holds an interesting position at the moment. The company’s traditional business, PCs, is dying and its having trouble spreading into new markets. Intel is attempting to move into mobile devices, and even set top boxes, but, according to a new report from Piper Jaffray, neither of those will save it from a poor first quarter result.
The report, which was authored by Senior Research Analyst Auguste Gus Richard, puts a $21 target on the company’s stock. Intel stock is trading at just above that level today. The poor performance is mostly due to lower than expected PC sales the analysts have modeled for the first quarter.
Intel Corporation (NASDAQ:INTC) needs to find another source of business in order to safeguard its revenues, though some of its other alternative businesses are still performing well. Intel got a large new Foundry contract in the last six months from Altera Corporation (NASDAQ:ALTR), and also managed to pick up some business from Cisco Systems Inc. (NASDAQ:CSCO).
The foundry business serves the company well, but there has, as of yet, been no indications that the company is going to be awarded the contract its been hoping for, Apple Inc. (NASDAQ:AAPL). The Piper Jaffray analyst says that there are no signs of a deal with Apple on the horizon. The value of such a deal is estimated at $5-$6 billion per year.
The server business is also performing well for Intel Corporation (NASDAQ:INTC). The first quarter of a new year is generally a goods one in the server business and this year has followed that trend. The increased weight of servers in the company’s revenue should, according to the report, shove the firm’s gross margins toward the midpoint of guidance, around 58%.
Intel Corporation (NASDAQ:INTC) has several problems ahead of it as it tries to evolve to meet the demands of a changing computing world. Though the company’s mobile offerings are looking better, that part of the business remains unprofitable. Ultrabook demand has not met expectations and the Piper Jaffray analysts think the prices of those computers needs to come down.
Intel Corporation (NASDAQ:INTC) first quarter is likely to be a weak one, and while the company has got some opportunities on the horizon, not many of them seem to have returned the company to the forefront of computing. As the analyst puts it, the company seems at the moment to be “circling the drain with no clear direction.”