MENLO PARK, Calif. (CNN/Money) -
As investors chomp on Intel's third-quarter results Tuesday (and, more importantly, its fourth-quarter guidance) it's worth reflecting on why there's so much totally valid enthusiasm for Intel of late.
Intel's (INTC: Research, Estimates) stock has doubled in a year, lapping the overall Nasdaq composite as well as its fellow Dow components.
To an investor who's just arriving on earth from Mars, Intel's 2003 earnings growth looks impressive. That's after two years of stagnation, of course (see Intel's latest earnings report, released Tuesday after the bell).
It's after the collapse of PC growth, still the main driver for Intel's performance.
| Recently by Adam Lashinsky
|
|
|
|
|
It's also after all the money wasted on broadband fantasies. And it's after businesses -- which buy PCs and servers, basically super-charged PCs -- battened down the hatches and stopped spending on all but the most critical equipment.
Now Intel's soaring again, and at least in the near term the reasons are understandable.
China. The world has a growth engine again, and it's located somewhere east of Europe and west of the Pacific Ocean. It's called China, and it's a boon to Intel.
To the extent China's growth continues, Intel stands to sell chips for PCs, communications networks and business systems.
The Asian giant is the big opportunity of the moment, so much so that Intel CEO Craig Barrett flagged the company's China prospects in a recent meeting with several Fortune editors. (See David Kirkpatrick's recent column for more on that.)
Convergence. The "C" word has been something of a joke in the technology industry. It refers to the fabled coming together of the PC and consumer electronics devices.
The thing about the joke is that it's getting less funny and more real. And Intel stands to benefit from it.
Take one product, wireless routers for the home. Intel doesn't make them.
But every time Linksys, Netgear or D-Link sells a wireless router to a consumer so they can use multiple computers, printers and even networked TVs in the house, the Intel-supplied chips in PCs become more desirable. Watch this trend.
The enterprise. Little by little you can feel businesses beginning to spend again. This is an unparalleled win for Intel.
YOUR E-MAIL ALERTS
|
Follow the news that matters to you. Create your own alert to be notified on topics you're interested in.
Or, visit Popular Alerts for suggestions.
|
|
|
 |
Sure, everyone's got all the PCs they need, except for the fact that they haven't updated them since 1999, the last time they had a real spending budget to speak of.
This stands to be good news for every company that caters to big business, but especially good news for the other monopolist at the center of PC sales.
Does all this justify Intel's stock performance and its always-rich valuation? Dunno. Does it explain why Intel investors have smiles on their faces and hopes in the hearts again? You betcha.
Adam Lashinsky is a senior writer for Fortune magazine. Send e-mail to Adam at lashinskysbottomline@yahoo.com.
Sign up to receive The Bottom Line by e-mail.
|
