Barclays Equity Research analysts Blayne Curtis, Christopher Hemmelgarn and Mark Kelley maintain Equal Weight ratings on Intel Corporation (NASDAQ:INTC).
Key takeaways for Intel
Barlcays’ analysts recently spent some time on the road with Intel Corporation (NASDAQ:INTC). The key takeaway was an improving environment in Enterprise for both PCs and Servers. A number of factors including the Windows XP end of life, a pickup in GDP growth, and a move towards new technologies like SDN and virtual storage are creating a modest tailwind and the company sees PC sales stabilizing and Enterprise servers growing high single digits in the coming years. Intel Corporation (NASDAQ:INTC) also highlighted a strong focus on growing its presence in the tablet and handset market to ensure a robust and sustainable ecosystem for x86 based mobile devices. While analysts still have concerns about the long-term health of the PC market and Intel’s prospects for mobile success as competition intensifies, they are encouraged by the better near-term trends and raise firm’s price target to $22.
Intel improving enterprise market
The Win XP end of life appears set to provide a steady tailwind for enterprise PCs through 2014 as Intel Corporation (NASDAQ:INTC) has seen a steady ramp in vPRO sales, but nothing resembling the sharp rise (and subsequent decline) some hoped for. Intel Corporation (NASDAQ:INTC) also sees continued strong growth in servers over the next few years (15% CAGR) as Cloud, HPC and Telco remain strong and Enterprise returns to growth on improving GDP and trends (SDN, virtual storage) that will require new equipment to implement.
Intel’s strong push in mobile
Intel Corporation (NASDAQ:INTC) has set out an aggressive goal to increase its tablet volume by 4x in 2014. Near term, this growth comes at the cost of a 150bps drag on GM, but the company strongly believes it needs to establish a meaningful x86 presence in the tablet market if it is to succeed long term. On the handset front, the company is narrowing its focus slightly to just the top tier OEMs and has laid out a product roadmap targeting the high (Broxton) and low (SoFIA) ends of the market. Analysts acknowledge that Intel’s manufacturing leadership and deep pockets may outlast some less committed competitors, but there is significant execution required from here to be a survivor and the competition is not going to stand still as technology advances.
