Intel (NASDAQ:INTC) will release its Q4 2011 and full-year results on Thursday, Jan 19th. The company’s first three quarters were solid in terms of revenue growth and as a result, its stock gained about 20% despite macro headwinds and some unfavorable PC market trends in developed countries. Q4 could be slightly different and below we take a look at few key aspects that investors should keep an eye on. Intel competes with AMD (NYSE:AMD) in the PC microprocessor business and with companies such as Qualcomm (NASDAQ:QCOM) and Nvidia (NASDAQ:NVDA) in the mobile microprocessor market.
Our price estimate for Intel stands at $29, implying a premium of about 15% to the market price.
See our complete analysis for Intel
Intel May Feel Pressure Of Macro PC Trends
In the previous three quarters, Intel benefited from the growing PC market in emerging countries (See article Intel Defies PC Market Trends, Revising Estimate to $29) and reaped profits by selling the higher-priced Sandy Bridge processors. The company saw low to high-double digit growth in several developing countries, driven by higher unit sales as well as improved pricing mix.
However, unlike the third quarter, Q4 saw a global decline in PC sales by about 1.4%. We believe that the positive results that Intel saw in previous quarters may be moderated due to this decline. It appears that even healthy growth in emerging markets could not compensate for the decline in PC sales in developed markets such as the U.S. and Europe. Furthermore Intel’s decision to cut Sandy Bridge prices in December is likely to have a slight impact on revenues and margins.
Hard Disk Shortage & Ultrabook Impact Will Be Limited
The hard disk shortage that resulted from flooding in Thailand in October 2011 is likely to have a modest impact on Intel’s Q4 results. Many of the hard disks to be shipped in Q4 were meant to be utilized for PC inventory build-up for future sales, so the impact could be more visible in the first half of 2012.
Furthermore, it appears that Intel’s launch of the Ultrabook did not garner much attention during the holiday season. The company is likely to spend more on advertising and promoting Ultrabooks in order to fight off cannibalization from tablets in 2012. Therefore we expect the impact of Ultrabooks on Intel’s notebook PC microprocessor sales in Q4 2011 to be insignificant.
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