Fitch Ratings has reiterated Intel Corporation (NASDAQ:INTC) Issuer Default Rating (IDR) at ‘A+’ with a Stable Outlook and the short-term IDR at ‘F1’. According to the rating agency, Intel is one of the strongest companies in the technology industry, and is a dominant player in manufacturing microprocessors for PCs and servers all over the world.
Intel poised to overcome challenges
Fitch holds the view that though Intel has been challenged recently with the advent of ARM-based processors for tablets and smartphones, its leadership in x86 based processors, which are most widely used in computing platforms, would provide a stable market opportunity to the company in the future.
Recently, Intel revealed some changes in its strategy to gain more traction in PC and mobile computing market. It is more focused on developing and offering market processors for the convertible notebook, tablets and smartphones, and expects such processors to level with the leading edge solutions for the traditional PC market using its most advanced 14nm manufacturing technology.
According to Fitch, Intel Corporation (NASDAQ:INTC) has exhibited its capacity to do well in the mobile market, but 2014 will be a vital year, when the company will get the chance to gain more share in this segment. Gradual stability in PC market and tremendous upswing in the Data Center segment will provide some flexibility to Intel for sailing smoothly through these market challenges in the years ahead.
Intel diversifying operations
Intel Corporation (NASDAQ:INTC) is all set to launch its foundry service in the wider segment where it would manufacture chips for direct competitors, in the smartphone and tablet markets. According to Fitch, this change would be a net neutral development for the credit. Intel will get the much needed diversification in the particular segment at a time when it is shelling out more funds on new manufacturing process technology development and capacity expansion. The strategy would also lower Intel’s risk of ultimate level of success in the smartphone and tablet market to the credit.
According to Fitch, Intel will uphold a comparatively conservative capital structure and balanced approach to shareholder-friendly actions. Leverage to debt ratio is expected to remain below 1x, and normalized free cash flow to adjusted debt to a range near 35% or above 50% before dividends.
Intel Corporation (NASDAQ:INTC) will finance its share repurchase and dividend through free cash flow. Also, Fitch is expecting Intel to continue with acquisitions.