The chipmaker giant Intel (INTC) has taken steps to meet its challenge after the stormy year 2019, which rocked INTC shares. Intel shares rose earlier this year due to improving prospects but were hit by the coronavirus market crash. With the renewed growth of Intel shares, many investors are probably wondering what the prospects are for the company.
A company from Santa Clara, California, managed the PC era by working closely with Windows software manufacturer Microsoft (MSFT) as part of the so-called Wintel alliance. But the growth of smartphones and other wireless devices has weakened its impact.
In 2019, Intel became the No. 1 chip maker by revenue, according to research firm Gartner. It regained first place after Samsung took the lead in 2017 and 2018.
Intel's market share last year was 15.7 percent, compared to 12.5 percent for Samsung, which was second in line. Intel's revenue from chip sales fell 0.7% year on year to $65.8 billion amid a slump in the semiconductor industry. Meanwhile, the total global semiconductor industry turnover fell 11.9% to $418.3 billion in 2019.
It should also be noted that on April 23, Intel surprised Wall Street with better than expected first-quarter results. It earned an adjusted $1.45 per share on sales of $19.8 billion in March.
Analysts expected Intel to make $1.28 per share at $18.7 billion in sales. On an annualized basis, Intel's profit increased by 63% and sales by 23%.
This was the fastest growth in company profits in more than seven years and the fastest sales growth in at least five years. The first-quarter results marked the second consecutive quarter of sales acceleration and microprocessor maker profits.
Intel's PC chipset sales grew 14 percent year on year in the first quarter, while data center sales increased 43 percent. Homeworking and home learning trends are driven by the coronavirus pandemic that contributed to PC sales growth in March this quarter.
However, Intel is cautiously following its recommendations given the "significant economic uncertainty" caused by the coronavirus crisis.
INTC shares face industry and company-specific problems. The electronics sector is currently moving out of a downward cycle. And the pandemic is likely to slow the recovery, analysts say.
At the same time, Intel is facing increased competition from Advanced Micro Devices (AMD) in personal computers and servers. Intel is lagging behind AMD in manufacturing chips on smaller nodes. AMD manufactures 7-nanometer chips while Intel manufactures 10-nanometer chips. The width of the chip is measured in nanometres, which is one-billionth of a meter.
Intel chief executive Bob Swan is working to ensure the company focuses on 30 percent of the semiconductor market instead of supporting 90 percent of the CPU or processor market, according to WCCFtech.
"We are positioned for another strong year in 2020," Swan said in a letter to shareholders published March 31. "We will continue to make significant investments in research and development and capital expenditures to provide an unrivaled portfolio of leading products, increase capacity for our clients, and accelerate Moore's Law transition.
He added: "We will continue to make significant investments in research and development to provide an unrivaled portfolio of leading products for our clients and to accelerate the transition of Moore's Law: "We expect that in 2020 we will return more than 100% of free cash flow through our dividends and share buyback".
On May 4, Intel announced the acquisition of Moovit for $900 million. Moovit makes an urban mobile application that offers travelers around the world multimodal travel planning by combining public transportation, and scooter services, bicycle riding, and car-sharing.