Intel Corporation (NASDAQ:INTC) is not going to see a good Winter according to Sterne Agee analyst Vijay Rakesh. A new report on the company argues that back to school and the holiday season, traditional highlights in the Intel year, will not be so positive this time around, as the company continues to deal with the death of the personal computer market.
Rakesh puts a price target of $20 on Intel Corporation (NASDAQ:INTC) shares and advises investor rates for the company at Neutral, but lowers his estimates for this year and the next. According to Rakesh, there is little upside for Intel Corporation (NASDAQ:INTC) until it transforms itself into a less PC-focused business.
Holiday results at Intel
According to the Stern Agee research, PC sales in the September quarter were flat. Intel guidance suggested that they should be up by 4 percent quarter on quarter as students going back to school purchased new computers. That hasn’t happened this year, according to the report. More and more students are opting for tablet computers rather than laptops.
There is also a lack of demand for the December quarter, according to the research. PC builds are “flattish” according to the report. That means that Intel Corporation (NASDAQ:INTC) is in for a poor September quarter and a poor December quarter, if the research proves sound. There is little uptake in other business to compensate.
Because of the soft September quarter, Mr. Rakesh is lowering his estimates for the PC market for the full year 2013 and next year. The PC market has collapsed faster than anyone seems to have anticipated. With Intel Corporation (NASDAQ:INTC) working to transform itself, that means poor returns for shareholders going ahead.
Intel new business
Intel Corporation (NASDAQ:INTC) has been gunning for the mobile market, which Rakesh sees as an “addressable market with strong robust growth.” There are several issues for companies trying to enter that field, however, and Intel investors may suffer more from mobile specific trends. Average selling prices are much lower for mobile processors than for notebooks. Rakesh puts the numbers at $20-$40 and $150 respectively.
The large drop in selling price is combined with a drop in gross margins from ~55-60 percent to 40-50 percent. The move to mobile chips, which Intel Corporation (NASDAQ:INTC) has not even proved it can make, will be a hard one for the company. The lack of demand for PCs is not making the transition easier.
