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By Andy Ng | 04-15-2014 06:00 PM

Cloud Infrastructure Sales Bright Spot for Intel

Although there were signs of stabilization in Intel's PC business, server chips remain the key to growth, says Morningstar’s Andy Ng.

Securities mentioned in this video
INTC Intel Corp

Andy Ng: Intel put out first-quarter results that were in line with our expectations. There were some signs of stabilization in the PC market, which allowed the firm's main PC-processor business to decline with typical seasonal patterns. A bright spot for the firm was the server-processor business, as the cloud infrastructure build-outs drove demand for server chips which allowed the group to grow 11% year over year.

For the second quarter, management expects revenue to be about $13 billion which at the midpoint would be up 2% and in line with typical seasonal patterns. All in all, despite the signs of PC stabilization, we think that in the long run, the PC market will still see some slight declines over time. What we're focused on in terms of Intel and growth is the server-processor business, as we believe that the cloud infrastructure build-outs will allow this business to be a key growth driver for Intel over time.

On top of that, if Intel can be successful in the mobile device opportunity with its Atom chips for smartphones and tablets, this could be another avenue of growth for the firm down the road. After reviewing the results, we're maintaining our fair value estimate of $25 per share. We think that the stock is fairly valued, slightly above our fair value estimate. But it's a name to keep an eye on, particularly given the cyclicality of the industry, if the stock were to come right down and present another buying opportunity.

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