It's Time to Separate the Fate of Intel From PCs

Investment analysts have a difficult job, no doubt about it. One of their greatest challenges is determining the near-term growth prospects of a company. Why near term? Because analyst reports are often used to support investment recommendations for brokers' favorite clients: active traders. Nothing wrong with that -- unless you subscribe to a longer-term, Foolish approach to investing.

And that brings us to Intel . Analysts' opinions on Intel are fairly consistent: a resounding ho-hum. Why? The same reason analysts have been reticent to recommend the chip-making giant for the past year: the declining PC market. Morgan Stanley is the latest to slam Intel's prospects based primarily on slowing PC sales, reiterating its underperform rating. That's too bad for Morgan Stanley clients, but it's great news for value-oriented growth and income investors.

PCs are dead -- but Intel's not
The PC market as a whole is expected to continue its decline, this year and through at least 2017, according to data from research firm IDC. The decline is due, in large part, to consumers opting for mobile devices rather than old-fashioned desktop PCs. Intel, like other IT bellwethers including Microsoft and IBM, was slow to make the transition to mobile. Former Intel CEO Paul Otellini said as much as the door was closing on his reign earlier this year.

So it's no surprise that analysts at Morgan Stanley, and others, consistently bemoan Intel's near-term prospects: PCs were what made Intel a $123 billion company, and they're dying an agonizing death. But that's exactly what makes Intel such a screaming buy for investors willing and able to look at next year, not next week. And new Intel CEO Brian Krzanich gets it.

The year ahead
The shift from PCs to mobile devices like tablets and smartphones offers a huge opportunity for Intel, and new CEO Brian Krzanich has the company well on its way to becoming a major player. This year, Intel's 32-bit Bay Trail chips found their way into Windows 8 and 8.1 devices, and its 64-bit version should hit the streets early in 2014.

It'd be easy to pooh-pooh the value to Intel of running Windows OS tablets with so little market share today, but that's about to change. IDC suggests Microsoft will sell more than 39 million tablets in 2017, up from less than 7.5 million this year. And with the deal for Nokia's growing devices and services unit nearly complete, the possibilities for Intel inside Microsoft smartphones shouldn't be discounted either.

The number and strength of Intel chips targeting mobile devices large and small, expensive and entry level, certainly doesn't end with the 32-bit and 64-bit Bay Trail units, either. New Atom, Quark, and Broadwell chips are a few of Intel's latest creations scheduled for full-scale release in the coming year, and are capable of powering Android devices, far and away the leading mobile OS in the world. And who knows, the love/hate relationship between smartphone rivals Samsung and Apple could open some doors for Intel, particularly as it gains momentum throughout 2014.

Final Foolish thoughts
Analysts serve an important role in the world of investing, and Fools can garner some useful insight into prospective investment opportunities via stock analysis. But bear in mind, though the near-term perspective that analysts sometimes take can impact stock prices and sway some investors, it doesn't account for companies like Intel that are in the midst of transitioning into a new, and more profitable, mobile world.

No, Intel isn't likely to double in stock price by early 2014; it's still in the early stages of its transformation. But 2015, and beyond, after it's established itself as a legitimate mobile competitor? That's a different story, regardless of what some analysts are saying.