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Topic: Value Stocks

Value Stocks: New computer chip will spur Intel’s revenue

Intel Corp.

Earnings for Intel Corp. fell in 2015 with weaker demand for PC computer chips. But the company’s purchase of Altera Corp. should increase this year’s revenue by 3.6%. That’s mostly from the sale of a new chip to speed up server computers. Intel is a buy.

INTEL CORP. (Nasdaq symbol INTC; www.intel.com) is the world’s leading computer chipmaker. Its products power 80% of all personal computers.

In 2015, Intel’s earnings fell 2.4%, to $11.4 billion from $11.7 billion in 2014. It spent $3.0 billion on share buybacks, so per-share profits gained 0.9%, to $2.33 from $2.31, on fewer shares outstanding.

Overall revenue slipped 0.9%, to $55.4 billion from $55.9 billion. Demand for computer chips continues to decline as consumers shift from personal computers to mobile devices. However, Intel is seeing higher sales of chips that power server computers.

The company spent $12.1 billion (or 21.9% of its revenue) on research in 2015, up 5.1% from $11.5 billion (or 20.6%) a year earlier.


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Value stocks: New chip combines technologies to speed up server computers

Intel recently completed its $16.7-billion purchase of Altera Corp., a maker of chips called field programmable gate arrays (FPGAs). Users can program them to perform specific tasks, which makes server computers faster.

Intel plans to blend Altera’s FPGA technology with its current designs on a single server chip. These integrated chips run much faster than systems that use separate chips. The company predicts FPGA chips will run 30% of the world’s data-centre servers by 2020 as more businesses shift to cloud computing.

Altera should add $1.8 billion to Intel’s 2016 revenue. It should also push up this year’s earnings to $2.59 a share; the stock trades at just 11.6 times that estimate. The $1.04 dividend yields 3.5%.

Recommendation in Wall Street Stock Forecaster: BUY 

For our view on a different approach to value stocks, read How to realize big benefits from a holding company discount.

For our report on another leading value stock among tech firms, read Cisco Systems keeps up to speed with faster computer networks.

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