Sure, Intel (NASDAQ:INTC) dropped some bad news Wednesday, announcing it was cutting its 2012 revenue growth forecast from “high single digits” to 3%-5% for 2012.
But no one’s sweating.
Investors already anticipating a slowdown actually trumped INTC shares up by about 4% in midday trading, and there still might be some more upside yet in the venerable chipmaker.
In the highly competitive semiconductor business, scale is a critical success factor. So it helps that Intel is the No. 1 player in the market, with a massive footprint of facilities across the globe.
This scale allows INTC to generate substantial profits, which came to $2.8 billion in the latest quarter. It means that Intel can devote huge amounts to research & development — in this case, Q2 expenditures came to a hefty $4.6 billion. To put that in perspective, that’s more than the market cap ($3.5 billion) of sectormate Advanced Micro Devices (NYSE:AMD).
Intel has been a relative laggard in mobile technology, but it looks like INTC might finally get some traction in the space. The chip pipeline is robust and should see a nice uptake from smartphone manufacturers.
The company also expects to get a boost from the transition to ultrabook computers. Over the next year, major PC manufacturers like Dell (NASDAQ:DELL) and Hewlett-Packard (NYSE:HPQ) will release a large volume of these devices. While tablets continue to grow quickly, ultrabooks might turn out to be better alternative for corporate customers, which still need to use more sophisticated applications.
Plus, Intel should benefit from another big trend: the cloud. The company is a big supplier of technology for datacenters, which must be bulked up to prepare for what’s expected to be massive long-term growth.
Also down Intel’s road is a potential lift once Microsoft (NASDAQ:MSFT) launches Windows 8 in October. While the past couple iterations haven’t been overly well-received, this operating system is expected to attract a lot of interest.
All in all, there are some clear drivers for Intel’s stock — which, by the by, still goes at an attractive valuation of 10 times forward earnings and throws out a fantastic 3.3% in dividends. For investors looking for growth and income, Intel still is worth a shot.
Tom Taulli runs the InvestorPlace blog IPO Playbook, a site dedicated to the hottest news and rumors about initial public offerings. He is also the author of the upcoming book How to Create the Next Facebook: Seeing Your Startup Through, from Idea to IPO. Follow him on Twitter at @ttaulli or reach him via email. As of this writing, he did not own a position in any of the aforementioned securities.