Key Factors You Should Consider before Investing in Intel

Key Takeaways from Intel's 1Q15 Earnings (Part 5 of 5)

(Continued from Part 4)

Data Center and IoT will drive demand for chips

In 1Q15, Intel’s (INTC) Data Center Group and IoT (Internet of Things) segment grew to $3.7 billion and $533 million, respectively. The Data Center Group and IoT segment’s revenue grew by 19% and 11% in 1Q15. IoT designs embedded chips for network-connected devices. Data Center and IoT are expected to lead demand for processors and memory chips.

To gain diversified exposure to Intel, you can invest in the iShares US Technology ETF (IYW). It invests about 4.56% of its holdings in Intel.

Intel continues to lead the semiconductor space

According to a report published by Gartner in January 2015, this is the 23rd consecutive year that Intel maintained its leadership position in the semiconductor space. In 2014, Intel continued to dominate the semiconductor industry that’s worth $339.8 billion. It’s followed by Samsung Electronics. It held 10.4% market share. Qualcomm (QCOM), Micron Technology (MU), and SK Hynix Semiconductor round out the top five players in the semiconductor market, as the above chart shows.

Chipsets launched for low-end phones and tablets

Intel was slow to adapt to the mobile revolution. However, one thing that gives it an edge over other companies in the industry is Google (GOOG) Android. Qualcomm’s leading OS (operating system) is compatible with Intel.

During Mobile World Congress 2015, Intel announced three new Atom chipsets—x3, x5, and x7—that are targeted towards budget handsets and premium tablets. Atom x3 is the company’s first SoC (system-on-a-chip) to feature an integrated modem in 3G and LTE (long-term evolution). In contrast, the Atom x5 and x7 are paired with a discrete modem.

Intel’s CEO Brian Krzanich expressed his optimism about Microsoft’s Windows 10 operating system. The system will be launched soon. Intel expects its Atom X series to be released as well.

While Intel’s CEO expects the PC market to be “challenging” in 2015, its initiative to diversify products and offerings in Data Center and the IoT segment is expected to pay off. Intel draws the majority of its revenue from the PC market.

2Q15 expectations

Intel stated that it expects 2Q15 revenue and gross margins to be in the mid range of $13.2 billion and 62%, respectively.

Browse this series on Market Realist:

• Part 1 - Highlights for Investors: Intel’s 1Q15 earnings

• Part 2 - Intel’s Client Computing Group Declined in 1Q15

• Part 3 - Data Center Group Continues to Be Integral to Intel’s Growth