Intel (INTC) is once again king of the chip world. The company CEO claims that profits will rise faster than revenue for the next two years because of better products and lower costs. He also says that the company has taken back 2% to 6% of the market share it lost to smaller rival AMD (AMD). And AMD is in trouble. It recently raised money to help offset its dwindling cash position.
So, what worlds can Intel conquer now. According to the company, "it will develop semiconductors for new varieties of hand-held gadgets, consumer-electronics products and portable computers for emerging economies." This would include pocket PCs that have broadband connections and could compete with high-end cell phone handsets. It may even move to supplying smart phones.
But, if Intel thought it would walk away from its triumph over AMD and move into these other markets to expand revenue, it may find formidable competition in the way, including Texas Instruments (TXN) and Qualcomm (QCOM). Both companies are expanding their chip offerings into 3G wireless broadband devices, and both have financial and technical resource beyond those available to AMD.
It is worth remembering that TI had operating income of $3.3 billion last year to Intel’s $5.7 billion. Qualcomm’s hit $2.7 billion.
The world of smaller gadgets, pocket communications devices, and consumer electronics gear belongs much more to the likes of TI, Qualcomm, and other firms like Samsung.
Intel may like the idea of expansion, but it will not be able to walk-over its new competition.
Douglas A. McIntyre can be reached at [email protected]. He does not own securities in companies that he writes about.
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