When looking for a new computer, there are certain terms that are common. Intel Corporation (NASDAQ:INTC) is one of them. I mean Mac and Windows run on Intel processors today. When looking for smartphones, ARM Holdings plc (ADR) (NASDAQ:ARMH) is the equivalent, but the brand is not as visible. Taiwan Semiconductor (NYSE:TSM) Manufacturing is the puppeteer behind the previous two.
You are the king
Despite having reported a decline in revenue and earnings, Intel Corporation (NASDAQ:INTC) remains a strong company and has positive prospects. As technology continues to advance over daily life, smaller and more efficient semiconductors will be needed. Also, the company has an interesting shareholder reward program.
Intel Corporation (NASDAQ:INTC) is the worldwide leader in PC processors, enabling it to have a spotless balance sheet and generate solid cash flow. The firm has, nonetheless, entered into many other aspects of the computing business. Recently, it has been able to strike partnerships with Google, NVIDIA, ASML, and finally acquired McAfee, that will accelerate the firm’s vertical integration and widen its product offerings.
R&D is an area on which Intel Corporation (NASDAQ:INTC) puts great emphasis through its tick-tock strategy. New products are expected to become more energy-efficient and smaller, for the PC user and the enterprise. Servers are of particular attention, given the increasing demand for cloud computing and virtualization. Additionally, the firm has great business opportunities for security and processor manufacturing technology for mobile devices.
Holding almost 80% of the market share for processors, Intel Corporation (NASDAQ:INTC) is the industry leader. Trading at 11 times its earnings, about half the industry average, investors have a chance to make a buck. Given the firm’s market position, it is recommended as a buy for the long-term.
Lying is good
In the technology industry, announcements of future products can help pull investors into buying stock. Taiwan Semiconductor Mfg. Co. Ltd. (ADR) (NYSE:TSM) has made several statements of the kind. But, what if the claims are straight out lies? Basically, risks are higher than contemplated and returns may be cut short.
Taiwan Semiconductor Mfg. Co. Ltd. (ADR) (NYSE:TSM) is a leading foundry operator, and thus, enjoys a small economic moat, limited by cheap market entry. The company holds a technological edge difficult for competition to match. Hence, current and future competitors will have a run for their money since it also retains pricing leverage.
On the financial side, Taiwan Semiconductor Mfg. Co. Ltd. (ADR) (NYSE:TSM) sports a strong background with no debt and rising revenue. But, cash flow and free cash has been declining while net income has stabilized. Competition is raising the bets, and giants like Intel and Apple Inc. (NASDAQ:AAPL) have been dumping dollars to displace the firm from its leading position.
Given the rising competition, the firm’s statements have to be taken as part of the business strategy. Evidence of the success for the company’s strategy can be found on the steady rise of its stock price, sane finances, and technological edge. It is recommended as a buy since competition remains low and might not match its quality for several years.
R&D and royalties may not stop competition
After demystifying ARM Holdings plc (ADR) (NASDAQ:ARMH)’s superiority over Intel Corporation (NASDAQ:INTC), the stock price deflated considerably. Nonetheless, the company posted positive results for its first quarter of 2013. The firm holds an important market share for mobile devices. Its legacy is based on low power consumption and wide intellectual property.
