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Semiconductor industry leader Intel (INTC - Free Intel Stock Report) reported respectable results for the September quarter. Revenues came in just a tad higher than we anticipated, at $13.48 billion. However, share net, at $0.58, was $0.04 higher than our estimate and in line with the year-before tally. The top line was aided by a 12% year-over-year increase at the Data Center Group, to $2.9 billion. What's more, the PC Client Group and Other Intel Architecture segments pitched in with strong sequential gains, though results slipped relative to the prior year. The gross margin, meantime, came in at 62.4%, 140 basis points above the midpoint of company guidance. This was the primary reason for the solid bottom-line performance, from our view.

The outlook for the fourth quarter was rather unexciting (which given the current environment isn't a bad thing). Revenues for the December period are likely to be $13.7 billion, plus or minus $500 million, while the gross margin is expected to be 61%, give or take a couple of percentage points. We forecast revenues will come in higher than the midpoint, at about $14 billion, while earnings per share are expected to be $0.53 based on our earnings model. Our full-year revenue estimate has been scaled back a bit (from $52.96 billion to $52.88 billion) while our bottom-line forecast remains at $1.90. The latter reflects a better-than-anticipated third quarter, coupled with slightly lower expectations for the December period. For next year, we are slightly less optimistic with our revenue estimate ($54.55 billion versus $55 billion), while our bottom-line target remains unchanged at $2.00 a share.

We remain cautiously optimistic regarding Intel's long-term prospects. True, the company is the leader in supplying silicon to the beleaguered personal computer market. And, unfortunately, this segment posted a low-double-digit decline in global sales during the June period, while results improved, albeit slightly, during the September interim (down high single-digits). We don't look for this trend to reverse itself in the near term, given the increased popularity of smartphones, tablets, and other mobile devices.

That said, we look for Intel to continue to augment its exposure to the mobile segment in the years ahead by internal and external means. ARM Holdings has a commanding presence in the smartphone market (more than a 95% market share), so Intel has its work cut out for it. However, the chipmaker's immense size, savvy management team, and healthy balance sheet give it the wherewithal to penetrate this lucrative market in the years ahead, in our view. Nevertheless, we believe that this will be a gradual process and thus market-share gains will be hard to come by, particularly at the onset.

Good-yielding Intel stock offers solid total return potential for the pull to 2016-2018. Capital gains potential should be driven by healthy annual earnings gains over that period. Intel management has done a good job of giving reasonable guidance, which has helped to support Stock Price Stability. A generous dividend helps to sweeten the pot, too.

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.