Intel (INTC) reported better-than-expected fourth-quarter results Thursday that relieved some concerns about the PC market following the chipmaker’s negative pre-announcement several weeks ago. We are maintaining our above-market fair value estimate for Intel and continue to hold the firm in our Best Ideas Newsletter and Dividend Growth Newsletter.
“$54 billion in annual (GAAP) revenue, up 24%, $2.39 in annual (GAAP) EPS up 19%, and $18 billion in dividends…”
Reading the above headlines, 2011 was truly an excellent and record-breaking year for Intel, and we believe 2012 will continue to be a good one for investors. For example, the firm’s product and technology pipeline includes opportunities presented by Ultrabook systems, data center and security needs, as well as Intel-powered smartphones and tablets, the latter segment already growing like a weed. We think PC Client Group revenue and Data Center Group revenue will continue to lead revenue growth into next year (both segments achieved growth of 17% during 2011).
Intel expects revenue in the first quarter of 2012 to be about $12.8 billion (+/- $500 million), down 8% from last year thanks to continued disruptions in the disk-drive chain caused by the Thailand flooding. During the period, its gross margin on a non-GAAP basis is expected to come in between 63% – 64%. For the full year 2012, however, the company believes revenue will grow at a high-single-digit pace (above consensus expectations) and thinks its non-GAAP gross margin will be between 64% – 65% (+/- a few percentage points), suggesting to us that it expects accelerated profitability through the course of the year. For comparison, Intel’s non-GAAP gross margin was 63.6% for all of fiscal 2011 and 65.5% during the fourth quarter, and we think such forecasts are achievable.