Intel shares drop as Wall Street questions mobile growth

SAN FRANCISCO Fri Nov 22, 2013 11:36am EST

People visit the Intel booth at the 2013 Computex exhibition at the TWTC Nangang exhibition hall in Taipei June 4, 2013. REUTERS/Pichi Chuang

People visit the Intel booth at the 2013 Computex exhibition at the TWTC Nangang exhibition hall in Taipei June 4, 2013.

Credit: Reuters/Pichi Chuang

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SAN FRANCISCO (Reuters) - Shares of Intel Corp fell nearly 5 percent on Friday after Wall Street came away from its investor meeting craving more evidence that the chipmaker can forge a strong mobile presence to drive up revenue and margins.

Investors wanted the company at the vanguard of personal-computer technology to lay out a plan to get higher-margin chips into tablets and smartphones, which are rapidly eroding sales of traditional PCs.

Executives on Thursday acknowledged that they had underestimated the impact of the mobile revolution, and Chief Executive Officer Brian Krzanich outlined plans to begin manufacturing semiconductors for other companies and develop microchips for cheaper tablets.

But some analysts warn the latter was a margin-eroding move, arguing Intel still had no technology to dominate next-generation smartphones that run on 4G LTE standards.

"There was a lack of real, confidence-inspiring color on mobility," said JMP Securities analyst Alex Gauna. "It is about bringing something different to the table in mobility that can sustain their gross margin structure.

"That's what we didn't get from the analysts' day, to really convince us that they're going to get back to growth."

On Thursday, Intel projected flat revenue and gross margins for 2014 - slightly below market projections for about 2 percent growth in sales. While analysts said the new CEO may be setting a low bar, others saw that as highlighting an uncertain 2014 and the difficulty of expanding margins as the PC market continues to shrink.

The "2014 guidance gave investors their first hints of the potholes in store on the journey," Bernstein's Stacy Rasgon wrote on Friday. "Intel is trying to buy their way into the tablet market at great near-term cost, and outlook for flat revenue, gross margins ... was disappointing."

Intel stock was down 4.8 percent at $24.02 at midday.

(Reporting by Edwin Chan; Editing by Lisa Von Ahn)

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