Intel (INTC) continued to report record quarterly results last year and the stock gained approximately 20% despite macro headwinds and some unfavorable PC market trends in developed countries. The chip giant did not let rival AMD (AMD) gain ground, and invested further in the development of more competitive chips for the mobile market, which is currently dominated by Qualcomm (QCOM).

Our price estimate for Intel stands at $29, implying a premium of about 15% to the market price.

Intel's success in 2011 came as the company took advantage of the growing PC market in emerging countries (see Intel Defies PC Market Trends, Revising Estimate to $29) and profited from the launch of Sandy Bridge processors. The company saw double-digit growth in China, India, Turkey and Indonesia. Furthermore, increased sales in emerging markets did not push down microprocessor pricing. In fact, Intel saw a significant increase in average pricing due to the higher-priced Sandy Bridge chips, as well as a shift in emerging markets to higher-priced microprocessors.

Last year was also marked by a significant change in CPU technology for Intel as well as for its competitor AMD. The Sandy Bridge Accelerated Processor Unit (APU) combines the power of a CPU and GPU in a singe chip. The new design enhances performance and makes integrated graphics or entry level graphics cards obsolete. Intel made this transition ahead of AMD, thereby gaining an early market advantage. While AMD has tried to focus on the GPU part of this hybrid chip, Intel believes more in having a powerful CPU (see our article Can AMD's Llano Beat Sandy Bridge?).

While the company performed well in 2011, 2012 may be tougher. There are concerns that the entry of ARM-based players in the PC microprocessor market will cost Intel market share. Additionally, as tablets cannibalize PC sales, even PC growth in emerging markets may not compensate unless Intel makes significant gains in smartphone and tablet markets with its Atom processors.

Intel also had to face supply issues in 2011. Earlier in the year, it ran into a problem due to some faulty chips that shipped, although this did not materially affect the company as it quickly replaced them. Toward the end of 2011, a hard disk shortage created some concerns and could impact Intel's Q4 2011 and Q1 2012 results.

While we expect the hard disk storage supply shortages will be temporary, concerns around the competition and PC cannibalization will attract greater attention in 2012.

See our complete analysis for Intel