Barron's: Intel's failure to enter the tablet market is a blessing in disguise

Barron's: Intel's failure to enter the tablet market is a blessing in disguise According to "Barron's" report, Intel has been unable to enter the currently booming tablet market, which may be a blessing...

According to Barron's, Intel's delay in breaking into the booming tablet market may be a blessing in disguise. Intel's recent share price performance has been far better than that of British chip design giant ARM, and it has become a safe haven among chip stocks when the semiconductor industry is deeply troubled by weak demand. Intel's stock price has risen about 16% since mid-September and hit a 52-week high last week; ARM's stock price fell nearly 8% during the same period. Moreover, Intel's estimated price-to-earnings ratio is only 9.8, and next year's earnings per share are estimated to be US$2.56, which makes it extremely cheap. ARM's price-to-earnings ratio has reached 40 times, and its profit margin is relatively limited. Due to oversupply, chip prices have experienced significant adjustments in recent months, which has also led to major consolidation in the chip industry. Many major semiconductor manufacturers use ARM designs, and tablets from companies such as Motorola Mobility use ARM chips.

However, in addition to Apple's iPad, sales of Motorola's Xoom, RIM's PlayBook and HP's TouchPad were not satisfactory, which resulted in ARM having to bear the overall industry weakness. Intel was not favored by mobile device manufacturers, and its choice to go its own way during the tablet craze now appears to be an advantage. Floods in Thailand in July caused local consumer electronics and electronic parts factories to suspend production. Coupled with the impact of the European debt crisis on the economy, chip orders have also worsened. Intel's active development of cloud computing is in line with the current needs of companies such as Google, Amazon, and Facebook to build huge data centers. Many large technology companies are direct customers of Intel. Unlike small businesses that rent servers provided by Best Buy, they use Intel chips to build their own servers. Intel's stock price has risen 18.9% this year, while the Philadelphia Semiconductor Index, which reflects the overall industry prosperity, has fallen about 8.8%. Research company Bluefin recently pointed out that China's domestic consumption power is weakening, which is not good news for the semiconductor industry, which means that there is still no prospect of recovery in the short term. However, the US Consumer Electronics Show (CES) will open in Las Vegas next month, which may slightly increase industry confidence. If the exhibited products receive a positive response from the market, they will sometimes push up the company's stock price, so it is too early to conclude that it is difficult for chip stocks to improve. One stock picking trick is to expand your focus to suppliers of chip companies. J&W Seligman Wake, a longtime observer of the tech world, said SNPS, a major maker of chip design software, is a good investment.