Intel Corporation (NASDAQ:INTC) forms the basis of a dying industry. The faster-than-expected decline in PC sales in favor of mobile devices like smartphones and tablets have driven a 10 percent drop in the value of the firm’s shares in the last three months, and things aren’t getting better for the company.

Intel Corporation

Bernstein Research released a “Black Book” study of the company last week. Bernstein’s Black books contain some of the hardest hitting and insightful equity research out there, and the results of research into Intel Corporation (NASDAQ:INTC) were not good. A report published yesterday, which made hearty references to the Black Book, gave Intel a price target of $18.

PCs aren’t the problem

The reigning narrative on Intel Corporation (NASDAQ:INTCD) is that the company’s PC business is shrinking and it’s going to take time to get into the mobile processor market in a big way to shore up its position. The company still makes the best processors on the planet, and it’s only getting better at it.

Bernstein isn’t so sure that the problems at Intel Corporation (NASDAQ:INTC) are that simple. The mobile market is the clear target for the company to move into as volumes and ASPs are falling in the PC market. However, the mobile market involves the same technological base, but market conditions describe a very different business model for Intel.

The mobile processor market is simply not that profitable, and it’s not likely to become super profitable any time soon. In order for Intel Corporation (NASDAQ:INTC) to swap out PC earnings for mobile earnings, it’s going to have to take a huge share of the mobile market, starting from almost nowhere.

Intel doesn’t have the relationships with OEMs in the mobile market that it does in the PC market, and they’re not going to be all that easy to build. The problems in the mobile market might be overcome, but there are coming trends in businesses that Intel relies on for restructuring cash that could negatively impact the company further.

Problems at home for Intel

The Bernstein research takes a good look at Intel core business and finds that the “safe” enterprise business may not boom with Windows XP upgrades after all. It makes more sense for big firms to install a “Thin Client” system. There’s also trouble for Intel on the server side, with competition increasing from ARM based models.

Bernstein isn’t completely negative on Intel Corporation (NASDAQ:INTC), but the research firm does believe that the company’s transformation is going to take a long time, and there is a huge amount of downside risk in between. For the analysts Intel Corporation (NASDAQ:INTC) shares are trading too high right now.

A price target of $18 may seem harsh with shares in the company trading at more than $22.50 today, but Bernstein is confident in its analysis of Intel’s position. Shareholders in the company may be in for a shock in the coming year.

Tags: