Intel (INTC) is the world’s largest chip maker, although recent news now suggests that two smaller competitors may be on its heels and gaining market share in newer and faster technologies. Intel currently holds 70% of the market for processors and historically has had a strong partnership with Microsoft (MSFT) supporting the Windows operating system.
On April 17th, Intel reported first quarter results and a strong outlook for the second quarter. Although Intel is already a giant of a company with a market cap of $128 billion, the company shows no signs of slowing growth and has a massive R&D budget to fund new technologies. Intel’s ability to leverage this research budget will be the key to Intel’s ability to maintain its status as a growth stock.
First quarter numbers show that Intel increased its R&D spend to $2.4 billion, which was 18.6% of its quarterly revenue. Intel also announced that in the second quarter of 2012, the company would launch Intel’s first batch of chips designed for smart phones as well as ship a higher volume of products based on its 22 nanometer Tri-Gate technology. Success in the 22 nanometer space is critical if Intel is to be able to compete effectively against ARM Holdings (ARMH) for share in the rapidly growing business of smart phone chips.
The company also released forward projects for the company’s general and administrative expenses for the second quarter 2012 of $4.6 billion. Assuming the ratio of R&D to MG&A remains the same in the second quarter as in first quarter, then the research and development spend would be an estimated $2.52 billion or the same 18.6% of revenues that was spent in the first quarter. To continue reading, click here.