Intel is past its prime

The company sounded downright Nixonian in its earnings call.

By Jim Cramer Jan 18, 2013 10:18AM
thestreet logoCircuit Board Datacraft Co Ltd imagenavi Getty ImagesI refuse to feel sorry for a company that generated $6 billion in cash flow for the quarter, that spent $2.5 billion for new capital equipment to stay ahead of the game and still paid out $1 billion in dividends. I am not going to cry over a company that had $11 billion in net income and had gross margins of 63% for 2012.


That's right, I refuse to feel any remorse for Intel (INTC) and its inability to hit it out of the park any more without very strong gross domestic product growth worldwide and customers that are able to do better than ones who use the other guy's chips. And this time it isn't Advanced Micro (AMD), but ARM Holdings (ARMH).

 

One could argue that you have to empathize with great American businessmen, premier manufacturers that simply can't grow fast any more, where low-single-digit revenue growth is becoming the norm and where you have to hope for a hockey-stick recovery in 2013 to get some real growth going.

 

Frankly, going into the quarter I expected more. Call me dated, but I thought the Windows refresh cycle would have more of a positive impact. Instead, Intel seemed to be hurt by the inventory clearance in older, Windows-7-based PCs. The burgeoning data center orders couldn't make up the difference.


Intel had also hung its hat on a huge ramp of the Ultrabook, but the tablet pretty much boxed that out. Plus, on the conference call Intel talked about the confluence of phablets (phone-tablet hybrids that are larger than smartphones, but smaller than plain old tablets) and how those are up-and-coming devices. Intel will have product for those markets and it lays claim to the mantle of offering the fastest and the lightest and the longest -- the usual superlatives -- with its new chips for that slice of the computing pie. In fact, it makes the point that Intel will have something for everything that is computing related that is competitive to anything anyone else has.

 

Good.

I just don't know if it will matter. I don't know if it will move the needle.

 

That's why, although I don't feel sorry for Intel, the subtext of the whole call felt a little Nixonian to me in the way that Intel is basically being reduced to a pitiful, helpless giant by the North Vietnamese, oops, by Arm Holdings.

 

In the end, forget the political implications of that statement. Intel, like the United States, is and will remain the strongest company in the industry. No one is going to touch its manufacturing prowess or its insight into how to build fabs, make them work and put out valuable chips for everything from the phablet to the data center.

 

It's just that all of that power and all of that miniaturization isn't driving sales the way it did. Microsoft's (MSFT) new software didn't make us throw away our personal computers. Intel is NOT the phone chip maker. It is a personal computer chip maker with chips for other businesses, just like Microsoft is a personal computer software maker with software for other businesses. (Microsoft owns and publishes Top Stocks, an MSN Money site.)

 

And that's really the story, isn't it? The inventor of the chip for personal computers that blew away mainframes, midrange and minis just doesn't have the chips the big customers want for their smartphones and their tablets, or they haven't been able to win over those customers even though they are fabulous at what they do.

 

Come to think of it, I do feel bad for them. But that's not a reason that the stock should go higher. If I want that kind of low-single-digit growth with a possible strengthening second half, I can get it from any industrial company. Yes, it is true that Intel has a higher dividend than most of those companies and a better balance sheet, but then again, try as it might, it cannot convince me that it has more leverage to a better economy than literally half of the Dow Jones averages, including Procter & Gamble (PG), Verizon (VZ), AT&T (T) and Cisco (CSCO).

 

It is, alas, simply another stock, nothing special, just a good manufacturer levered to a part of the economy that has passed its prime without another part ready yet to take its place.

 

Cramer's face

 

Jim Cramer is a co-founder of TheStreet and contributes daily market commentary to the financial news network's sites. Follow his trades for Action Alerts PLUS, which Cramer co-manages as a charitable trust and is long CSCO.

 

 

 

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10Comments
Jan 18, 2013 12:10PM
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Well, so cramer says it's a sell so now I know for sure to buy more Intel !
Jan 18, 2013 10:46AM
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boy, a long winded article to say "just another stock here, move along"........
Jan 18, 2013 11:43AM
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Yep, Jimmy that's what they said when AMD challenged them in the PC space. Let's see how Intel's tick tock works with their Atom 3D 22nm Haswell chip latter in 2013. Apple's past their prime not Intel.
Jan 18, 2013 11:44AM
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before you believe anything this crook says just watch him on CNN in the morning for

10 minutes...............this is just a token unfunny clown

Jan 18, 2013 12:39PM
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and those banks that are still kept as living dead, Citi, BofA, etc.
Jan 18, 2013 11:33AM
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Cramer here is one for you and your handlers !  The global monetary think-tank (OMFIF) says BUY GOLD  BUY GOLD ! The stock market is a rigged game !  TAKE YOUR MONEY AND RUN !  BUY GOLD !
Jan 18, 2013 1:45PM
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If Cramer isn't willing to write about better topics, I'll gladly toss one out... Japan will irresponsibly print fiat Yen to salvage it's stakes in Euro bonds. Most Central Banks will join them. Essentially, there is a very small allowance for unsupported currency before it undermines an economy. When the fiat gets used because there is a weak economy, it does two things... dilutes the consumer's ability to stay up with costs (counter-inflation) and causes an investment bubble that has no substance. Essentially, a break point happens where basic function cannot because it's costs exceed what price it could get for it's production. There is a "smoke" in play today... an emphasis on administrative jobs and dominance of imports from work slave nations. You have to figure that IF those Euro bonds did what they were supposed to do, there would be a zillion small and growing business ventures in Euro. The Euro EKG is flat... outside of a couple of northern nation old-line businesses, nothing else is alive (the reason why Japan is trying to bolster it's positions with fake money). One thing is obvious... Central Bankers are playing Follow the Leader and no one is out front, so wandering aimlessly is in vogue. Second... no society EVER thrived on finance alone and it is certainly a financially-dominant world today. Lastly, the predominance of administration allows a bunch of useless dim-witted fools to have voices. Most couldn't make themselves soup for lunch. A correction is in the works. New currencies for normal people and a Borg-like assimilation for those unwilling to work for a living and be a part of a nation and normal society. Wish we at the bottom... but I don't see 2013 bringing us there. France... 1790... they arrested the farmers because they couldn't grow grain that would become flour, without going bankrupt.
Jan 18, 2013 12:38PM
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Apple, Microsoft, Intel, Hewlett Packard, Dell...and the list goes on and on
Jan 18, 2013 4:01PM
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I'm sure the anaylist who says the stock market will lose 20% is going short, as well as the other people who put him up to the scare.  It's wearisome with all these so-called experts trying to twist the news to their benefit.  Too much of the stock market is raw emotion and people like these keep playing the system by influencing it.
Jan 18, 2013 11:07AM
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Wasn`i Intel $67 a share in 2000?It was a can`t lose stock in the 1990`s that made

a lot of people millionaires.Like Dell, Cisco, and Microsoft are way down from their highs

in the 1990`s.Every time you turned around people were telling you how those stocks

turned them into millioaires.AOL was another millionaire maker as was EMC.

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