Where is the Growth?

Implications: Intel announced:
- A lower revenue, but a higher profit than last year, but steady pricing
- Lowered forecast for next quarter to below analysts expectations


Analysis: In the midst of dot com boom in the late 90's Intel management was confronted with nagging growth prospect in PC and Server markets. With over $10B in cash, and a savvy Intel Capital arm, Intel's answer was to go on a buying binge. Inability to fully integrate other firms and take advantage of their technology, combined with Dotcom bust and pressure on profits from a revived AMD forced Intel to face the music. Intel divested of many these acquired ventures, including some with that have consumed a fair amount of R&D from Intel such as Wireless and handheld.

After a tumultuous few years, Intel is now back to being our familiar cash machine. Its line up of server and PC chip are in ship shape, and 45 nanometer factories are coming on line with record speed.Unfortunately the market growth for Intel product is still looking grim.The question for Intel today is, as it was in mid 90’s, what is next?They are experimenting with ultra small PC’s, hoping that it would take market share from PDA’s.They are looking at Digital Home Front, and may be some other potential high growth markets.But divesting of xScale has limited their ability to serve many of these markets.What will Intel do next, will determine its status as a “growth” stock.