Intel came out with their full year report and directly the market punished the shares with a drop of almost -5% which is a lot especially considering that the analytical people should have had a pretty good idea from the previous three quarter reports how well / how bad Intel was doing. Still... why did we see this drop?
All the information that I am showing here can be found on the Intel homepage here.
One of my blog partners, Chris Bailey with Financial Orbit, made this publication concerning Intel and their full year report so for a second opinion or a different / better analysis then mine please check it out!
What we can see in the table above is that the full year of 2013 was far worse then 2012 with -2% less revenue and even worse -13% less earnings. What is very interesting here is that when we look at the development in Q4 Intel performed better in 2013 than in 2012 so the reason for the drop, should according to the Efficient Market Hypothesis, not be due to full year lowered revenue and earnings since that should already have been built into the share price especially after the previous three quarters that were already them bad.
Personally I doubt that. With things like this I really get the feeling that the analysts had made zero to no adjustments during the other quarters to their full year estimated earnings and then woops... they all of a sudden end up with a large difference in the final quarter based on their expectation and push the sell button like crazy.
Besides from that the report was not good and it did not promise a golden chest at the end of the rainbow. It was straightforward saying that they do not really expect any changed earnings in the next year and that is probably the major reason for why the share dropped. There has lately been a lot of talk of Intel being able to step into the mobile as well as tablet market with their 64-bit chips etc which has artificially pushed up the share price the last couple of months and since there was no promises of that in the full year report I guess that disturbed some speculators.
If we look at the segments their big bulk of PC Client Group dropped by almost 5% and also the Other Intel Architecture dropped in revenue while the Data Center, Software and Services as well as All Other has seen increased sales during the year. I think here we can once again see the reason for the negative response since Other Intel Architectures include the mobile phones etc so the market would have liked to see an increase there (which they actually did in the final quarter but not for the full year).
Conclusion: Intel stays in the portfolio! This report neither made me change my mind or have me worried that they are going off in the wrong direction. Yes, the report could have been much better but based on the previous three quarters I was for one not expecting a miracle to happen. Instead I would like to say that I was worried about the share price increase that had taken place lately since I saw no real reason for it besides from rumours etc.
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