Intel Corporation (NASDAQ:INTC) has been faring nicely in the start of the year with its stock gaining 30% in just a few months, but all is not well in the second half of this fiscal for a few reasons, says a report from Investorplace.
The report goes on to say “if you’re looking for new investments in the new year, steer clear of this tech stock.”
Mobile efforts, no significant impact
Intel’s foray into the mobile segment has lagged behind competitors like ARM Holdings, Qualcomm and Broadcom. The chip maker has shelled out enough money to ramp up its growth in the smartphone segment, but nothing concrete has come out yet. Bay Trail, a low power chip, has gained the attention of some manufacturers, and the chip has limited demand from tablet makers like Hewlett-Packard and Toshiba, but no major smartphone company like Apple Inc. (NASDAQ:AAPL) has come yet. The investments in the mobile segment will not produce substantial result in 2014, according to the report.
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There is a huge difference between phone chips and PC chips in terms of margin, which implies that if Intel is garnering a fifth or a tenth of the profits on these mobile chip lines, it will need to sell 5 times or maybe 10 times more chips.
Dividend growth declining for Intel
Intel Corporation (NASDAQ:INTC) has an impressive yield of 3.7%, which is very strong in the technology sector. However, the rate of growth in dividend has come down, which limits the possibility of income stream increasing any further.
In 2003, Intel paid a dividend of 2 cents per quarter, and today it pays 22.5 cents, which is a tremendous hike of 1,150%, in just 10 years. However, recently Intel increased its dividend from 21 cents to 22.5 cents, which is a hike of just 7%. Rate of growth of dividend at Intel has declined which is not discouraging, but if the trend continues then investors will get increasingly worried about the current yield.
Selling OnCue, a short term drawback
Recently, Intel Corporation (NASDAQ:INTC) decided to sell its ambitious, but strategically unfit OnCue online pay TV service for $500 million. The company is trying to sell the segment by the end of the year, and one of the suitors is Verizon communications. Through this decision, Intel has withdrawn itself from the pay TV business to focus on its core business of chip making. According to the sources, newly appointed CEO Brian Krzanich is making more efforts to take further the core business of the company rather than deviating to other sectors.