Intel Not Inside

Intel (INTC) stock has performed abysmally over the past five years.

Intel, one of the most dominant companies in 20th-century Silicon Valley, has not adapted to market changes: [bold added]

Following one of Intel’s worst quarterly earnings, corporIate technology chiefs are left questioning the long-term future of the chip maker, which has struggled to execute on a promised turnaround. But they aren’t letting go of its PCs and servers.

On Thursday, Intel reported a loss of $1.6 billion for the second quarter, compared with a $1.5 billion profit a year earlier, and projected revenue 10% below Wall Street’s consensus and gross margins 25% below expectations, according to FactSet data.

The company also plans to lay off about 15,000 people, most by the end of this year, and pause dividend payments in a cost-saving drive three years into Chief Executive Pat Gelsinger’s turnaround effort.

For chief information officers, the results are the latest sign Intel has struggled the most of the other tech giants—Cisco, Microsoft and Dell—that dominated the dot-com era. And without a clear foothold in the all-important artificial-intelligence chip market led by Nvidia, Intel may not be a company to bet on in the future.

Intel was largely shut out of the mobile phone business because it focused on developing the x86 architecture used in PC's; it missed the market's desire for power-efficient chips that would extend battery life. And it's not even considered a player in artificial intelligence. However, it still has some core strengths that keep most customers coming back:

Meanwhile, corporations are still buying from Intel, which continues to dominate market share for non-AI computing workloads on servers. Second-quarter sales fell 1% from the same period a year earlier.

Intel has an advantage over rivals because it owns its chip fabrication plants, [Graphic Packaging CIO Vish] Narendra said. “They have a chance to recover some ground,” he added, “but that’s going to take some years.”

There's also Intel's history of reliability:

[Citi analyst Christopher] Danely said that despite Intel’s chips being outpaced from a performance perspective, they still have strong security and stability, making them appealing for the enterprise. Plus, changing suppliers isn’t always an easy or cheap option.

The stock market has a strong emotional component, and I don't think INTC has bottomed out. However, it is possible for Silicon Valley companies to rise to even greater heights after becoming nearly insolvent, Apple, Tesla, and Nvidia being among the most notable examples.

I'll likely pick up some INTC shares in the next 12 months.