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Semiconductor industry leader Intel (INTC - Free Intel Stock Report) reported mixed results for the June quarter. On the plus side, share net came in at $0.39, which was on par with our expectation. Revenues came in at roughly $12.8 billion, which was a tad lower than our forecast of $12.9 billion. The gross margin, meanwhile, was 58.3%, which was in line with our initial estimate. PC Client Group revenue was $8.1 billion, a 1.4% sequential improvement, though down 7.5% from last year. Also, Data Center group revenue comparisons were up about 6%, to $2.7 billion, from the March period, and were roughly flat year over year. Other Intel Architecture sales were $942 million, representing a 2% sequential improvement, though decreasing 5% from last year's comparable period. 

However, the news is not all that good going forward. Management gave third-quarter revenue guidance of $13.5 billion, plus or minus a couple of percent, while the gross margin is likely to be 61% or so. While the gross margin expectation is roughly on par with our expectations, we had been looking for revenue of $13.75 billion for the interim. We believe this reflects an uneven domestic economic recovery along with sluggish demand trends in the personal computer market. According to industry sources, PC shipments fell about 11%, year over year, during the June quarter. What's more, full-year revenues will likely be roughly on par with last year; management had been looking for a modest increase.

As a result of the recent news, we now look for Intel to post revenues and earnings of $53.35 billion and $1.85 a share, a $190 million and $0.05-a-share reduction from our view at the time of our July 5th, full-page report. Too, we have scaled back our 2014 revenue expectations by $730 million, to $55 billion, while share earnings will likely come in at $2.00, a nickel below our prior estimate.

So what's our long-term view on Intel, one may ask? True, the company has been sailing in choppy waters over the past couple of years, reflecting less-than-stellar economic conditions coupled with declining personal computer demand. At this point, we are cautiously optimistic that newly elected CEO Brian Krzanich can right the ship 3- to 5-years hence. Much of the company's success moving forward is dependent on increasing its penetration in the mobile market. The company currently has only about a 1% market share in tablets and smartphones, which are two large segments in the mobile segment. Meantime, ARM Holdings enjoys about a 95% piece of the pie. However, we believe that Intel has the size and strength to garner notable market share in the years ahead. Intel recently launched the Silvermont, an architecture that delivers greater power savings and better performance than earlier versions. Also, Samsung Electronics confirmed that it was using an Intel chip in one of its Android tablets. Hence, we look for Intel to increase its presence in the all-important mobile arena going forward, which will help it diversify its portfolio. The personal computer segment currently accounts for nearly 75% of Intel's operating profit. 

We view Intel stock as a core long-term holding for investors seeking technology exposure with a solid income stream. In all, total return potential 3- to 5-years hence is solid at the recent valuation, and reasonably well defined.

About The Company:Intel Corporation is a leading manufacturer of integrated circuits. In addition to primarily supplying manufacturers of personal computers, the company serves a multitude of other global markets, including communications, industrial automation, military, and other electronic equipment. Intel’s product line consists of microprocessors, with the Pentium series being the most notable. It also manufactures microcontrollers and memory chips, and the company sells computer modules and boards, and network products.

At the time of this article’s writing, the author did not have positions in any of the companies mentioned.