An Ideal GARP Stock

Intel Corporation is the world's largest semi conductor company in terms of revenue. It designs, manufactures and sells integrated digital innovation platforms worldwide. Intel was the first developer of the commercially viable microprocessor. It operates in four segments: PC Client Group, Data Centre Group, Architecture and Software & Services Group. Some of its popular brands include Pentium and Core processors for PCs, Xeon for servers and Atom for notebooks. I believe that Intel is one the few research stocks which provide both growth and value proposition. I expect the growth will come from strong product pipeline and opportunities in Cloud Computing.

80% market share in the PC Industry

Intel has an 80% market share in the PC Industry and it derives 66% of its earnings from this segment. One of the concerns which bother most of the investors is - Can Intel nevertheless grow its revenues in spite of of maturing PC market? I think yes.

The then and there big growth possibility lies in Cloud computing and PC segment's loss will be Data Center's gain. Cloud computing is a critical IT trend taking focus away from PCs to data centers where all computing power and data is housed. Not only is this a high growth possibility, it is as well a high margin business. And in spite of of the fact that it is nevertheless an emerging research, the adoption rates are rapidly increasing.

One of the key data points helpful in forecasting nearly term data center spending is the capex guidance from big data center spenders like Apple, Google, Yahoo & Facebook. Higher spending guidance from these companies indicates higher data center capex growth in 2012 and I believe Intel is in a competitive position in this high demand environment. Along with the current offering - - Sandy Bridge EP -- which is already doing so then, Intel is expected to launch Ivy Bridge EX, a high end processor for the servers by mid 2012.

In addition to opportunities in cloud computing, Intel as well has a strong product development pipeline. It is constantly developing new microprocessors which are focused on performance and increased capabilities. One such product to watch out for hereafter would be TriGate transistors for 3D chipsets. This robust product development seems to be supported by its higher capital expenditure guidance for 2012. During higher capex is seen as a negative in the main due to downside risk to gross margins, it can as well be a long term positive as Intel attempts to furthermore distance itself from its peers and build entry barriers together penetrating newer markets.

More growth drivers for Intel include gaining traction in smartphones. Intel announced at the recent World Mobile Congress that it is partnering with Orange, ZTE and Lava who will be adopting Intel's Atom processors for their smartphone launches. This is should the contingency arise to the existing relationships with Lenovo, Motorola and Google. Smartphone is one area where Intel lags behind Advance Micro Devices. For all that, it is impressive that Intel is expanding its global footprint in smartphones. This may not translate much into revenue growth in the nearly term, however with its 14 mm and 22 mm offerings henceforth Intel could become a serious contender in this space.

Maturing PC market

Even with a maturing PC market, Intel has solid growth opportunities in servers, driven by emerging cloud innovation and related applications. Furthermore, Intel continues to invest in its product pipeline which will differentiate it from its competitors in terms of product offerings. Given its attractive valuation & Good growth opportunities, I believe it is a good GARP stock.