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Intel Still Looking for Next Growth Play as It Reports Q1

With PCs and server sales falling and new initiatives still taking shape, investors are pessimistic.

Nick Knupffer / IntelPR

It has been nearly a year since chipmaker Intel named Brian Krzanich as its new CEO, and in that time, the troubles it faces haven’t changed.

First, there’s the ongoing malaise of the personal computer industry for which Intel is a primary supplier: When the market research firm IDC reported a 4.4 percent year-on-year decline in unit shipments in the first quarter of the year, it was greeted as good news because it was somewhat less bad than feared.

Intel’s other major end market for chips, the servers that run in massive data centers, hasn’t been faring much better: IDC reported a similar decline in the fourth quarter of 2013, the most recent quarter for which data are available. And that business is coming under attack from a new generation of chips based on rival designs from the British chip design firm ARM.

That has the world’s biggest chipmaker scrambling to find its next big thing, but it hasn’t found it yet. Its attempts to sell chips into smartphones has largely fallen flat. It demonstrated some interesting ideas for wearables at the International Consumer Electronics Show in Las Vegas earlier this year, including the Quark line of tiny chips.

It has also been spending. Last month it closed its acquisition of BASIS Science, a maker of wearables. And it has also made a big bet on Hadoop, the open source big data analysis software platform. Intel backed the leading Hadoop vendor Cloudera with a $740 million investment for an 18 percent stake and it stands a fair chance of buying out the whole thing eventually.

There has also been some restructuring. In January it announced job cuts of about 5,000 or about five percent of its overall headcount. It also sold to Verizon the assets related to OnCue, its attempt to get into the Internet TV business.

Analysts polled by Thomson Financial expect Intel to report earnings of 37 cents per share on revenue of $12.8 billion. Shares have risen by 13 percent since its last earnings report. But there’s clearly a lot of anxiety that Intel will report another miss as it did in January. As Barron’s noted yesterday options traders have been aggressively betting that Intel shares will not rise during the month of April. Perhaps the results will surprise them. We’ll all see in a few hours.

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