Wintel rebirth amid the stock market turning negative about the Wintel future

Despite of the Intel video of a year ago getting totally new meaning this week:

with:

the stock market has just turned negative about the future of both companies:

image
source: http://seekingalpha.com/symbol/INTC

image
source: http://seekingalpha.com/symbol/MSFT?s=msft

An explanation for that:

Why I Sold All Of My Intel Shares This Week [a “casual investor” by nickname Quoth the Raven on ‘Seeking Alpha’, April 3, 2014]

Summary

  • Intel was upgraded by a Piper Jaffray analyst, who cited a slowing PC market decline.
  • The PC market, sans Mac, has been on a decline that hasn’t ended, despite people like myself predicting it would have bottomed by now.
  • I sold my Intel shares for the time being and am grazing greener pastures.

By now, we all know some of the questionable points about Intel’s (INTC) business. In the past, I’ve written about the company being a little slow on the uptake when it came to mobile and tablet sales. Most recently I’ve questioned the company’s vision for jumping into cloud computing with a major investment and abandoning their in-house Hadoop project, ultimately leading to a major waste of money and resources.

First things first; I sold out of my Intel long position the other day, not necessarily discounting the company to be a long-term hold again at some point in the future. I needed the capital for other purposes, evaluated the many positions in my portfolio, and found the most unease about Intel – so, I sold – for now.

And, sure enough, right after I sold, Seeking Alpha came out and reported that Piper Jaffray came out and upgraded the stock:

  • As part of a change of coverage for chip stocks, Piper is upgrading Intel to Overweight, and downgrading Broadcom (BRCM) to Neutral.
  • The firm thinks Intel will benefit from stabilizing PC sales, and is worried about Broadcom’s mobile customer concentration (presumably with Apple and Samsung).
  • IDC still expects PC shipments to fall another 6% in 2014. But Y/Y decline rates have been narrowing in recent quarters.
  • OTR Global recently reported Broadcom’s 3G baseband chip sales to Samsung have fallen sharply. Samsung has also taken steps to increase its use of in-house Wi-Fi and Bluetooth chips, though that hasn’t stopped Broadcom from continuing to secure combo chip design wins.
  • Apple bought Bluetooth chipmaker Passif Semi last year (possibly for iWatch R&D), but hasn’t yet done anything to suggest it’s working on Wi-Fi chips.

When I dug a little deeper into the reasoning behind the upgrade, one thing perked my ears up. Piper is coming out and assuming that the PC market is going to continue to slow and then eventually bottom. I thought this very same thing six months ago. Since then, I’ve continued to watch the PC market decline – albeit slower now – but it has yet to hit a bottom.

Again, Intel’s biggest friend here has been Mac, which has been able to buck the overall trend of the PC market and continue to sell well. Intel leveraging its relationship with Apple (AAPL) at this point remains a key factor in their success.

As the main constituency of Intel products travel through the sales of PCs, this continues to remain a point of unease for Intel. Additionally, Piper is seemingly betting on a flawless execution and growth of Intel’s Quark chipset which certainly is possible, but remains to be seen at this point.

Gartner’s numbers, shown below, continue to show a decrease in PCs for 2015, and an increase in both tablets and mobilewhere Intel still does not have a steady foothold.

(click to enlarge – source)

image

Further, the headlines surrounding the market that even I predicted would have stabilized by now, continue to look ugly. cnet reported:

PC sales will continue to nosedive this year as more consumers scoop up mobile devices, says a new report from Gartner.

Global shipments of personal computers will total 276.7 million in 2014, Gartner forecast on Thursday, a 6.6 percent drop from last year. On the flip side, tablet shipments will jump by 38.6 percent thanks in part to greater demand in regions outside North America.

But the number of people replacing their aging PCs with tablets is actually expected to decline.

But what about globally, you ask? I asked the very same thing – same uneasy headlines, different countries. We continue to see reports, like this one out of Taiwan, claiming that PC sales are poised to decline:

Total PC sales in Taiwan are poised to decline for the fourth consecutive year, as consumers continue to favor mobile devices that are less expensive than, but as productive as, their pricier counterparts, International Data Corp [IDC] forecast yesterday.

National PC sales are expected to fall by 5.1 percent to 2.55 million units this year, following a 15.6 percent fall last year, the market research firm said in a report.

Desktop computers are projected to account for 60 percent of total PC sales this year, with notebook computers making up the remaining 40 percent, the report said.

Last year, desktop and notebook sales in Taiwan reached 1.68 million and 1.01 million units respectively, it added.

But when are we going to hit the coveted bottom that we continue to talk about? It is coming, possibly, but it sure isn’t here yet. And, as long as these sales continue to decline, Intel remains at a vulnerable point as a company. Especially with the questionable vision they have shown of late.

Again, this data [dated March 5] from IDC is once again suggesting that PC sales are going to decline more than we expected this year:

Shipments of new personal computers, most of them equipped with Microsoft Windows (MSFT), will decline more in 2014 than thought a few months ago, researcher IDC said Tuesday.

IDC said that PC shipments will drop by 6% from the year before to approximately 296 million, a smaller number than it forecast three months ago, when it said global shipments would decline 4% in 2014.

Last year, shipments contracted by 10% compared to 2012, dropping to about 315 million new PCs.

IDC revises its numbers quarterly, said Rajani Singh, an analyst with IDC, who pointed out that as the market changes, the company modifies its forecasts, sometimes up, sometimes down.

Even though I thought their new incentive-based pay program was a good idea, there were many that disagreed with me and thought it was bad for business. You could say the same, again, about the company’s recent foray into cloud computing. People ask, “Is it too little, too late?” Why does it seem like Intel is just throwing everything against the wall to see what sticks?

(click to enlarge)

image

Do I think Intel is an absolutely horrible stock to be in for the long-term? Of course I don’t. It pays a dividend, has a good balance sheet, and is going to be around for many years to come. Do I think Intel is ripe for a short to mid-term trade? Absolutely not. I think there’s still work that needs to be done at this point before we see Intel push up towards $30/share and, thusly, I made my decision to sell my Intel shares for the time being and enter an Intel holding pattern.

Best of luck to all investors.

About Nacsa Sándor

Lazure Kft. • infokommunikációs felhő szakértés • high-tech marketing • elérhetőség: snacsa@live.com Okleveles villamos és automatizálási mérnök (1971) Munkahelyek: Microsoft, EMC, Compaq és Digital veterán. Korábban magyar cégek (GDS Szoftver, Computrend, SzáMOK, OLAJTERV). Jelenleg Lazure Kft. Amire szakmailag büszke vagyok (időrendben visszafelé): – Microsoft .NET 1.0 … .NET 3.5 és Visual Studio Team System bevezetések Magyarországon (2000 — 2008) – Digital Alpha technológia vezető adatközponti és vállalati szerver platformmá tétele (másokkal együttes csapat tagjaként) Magyarországon (1993 — 1998) – Koncepcionális modellezés (ma használatos elnevezéssel: domain-driven design) az objektum-orientált programozással kombinált módon (1985 — 1993) – Poszt-graduális képzés a miniszámítógépes szoftverfejlesztés, konkurrens (párhuzamos) programozás és más témákban (1973 — 1984) Az utóbbi időben általam művelt területek: ld. lazure2.wordpress.com (Experiencing the Cloud) – Predictive strategies based on the cyclical nature of the ICT development (also based on my previous findings during the period of 1978 — 1990) – User Experience Design for the Cloud – Marketing Communications based on the Cloud
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One Response to Wintel rebirth amid the stock market turning negative about the Wintel future

  1. Pingback: Wintel újjászületés: $0 Windows licenc + Bay Trail-Entry SoC = $99—$129 árfekvésű, 9” alatti képernyőjű Windows 8.1 tabletek Shenzhenből | Szoftver aktualitások

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