Intel Plans to Spend Big Bucks Next Year to Play Catch Up
Intel (NASDAQ:INTC) announced today that it had barely beat Wall Street earnings expectations for the quarter, coming in at $12.8 billion compared to the analyst-predicted $12.77 billion. But the real news maker was the amount the company plans to spend in 2012.
With PC demand falling and computer drive supply down due to flooding in Thailand, the company announced that its capital expenditures would be around $12.5 billion in 2012 in an apparent move to catch up with and jump into the tablet and smartphone arenas with improved chips. The 2011 capex for Intel was $10.7 billion.
Yahoo! Finance quoted Evercore Partners analyst Patrick Wang who said, “The biggest surprise is the capex for the new year. They’re investing to catch up and not only be at parity but exceed where the handset incumbents are.” Lenovo and Motorola Mobility (NYSE:MMI) have both agreed to use Intel’s new Medfield chip in their upcoming lines of smartphones.
Intel will also try to fend off investor worries by launching the largest marketing campaign since 2003 around “ultrabooks,” hoping to compete with Apple’s (NASDAQ:AAPL) Macbook Air. The stock prices of Microsoft (NASDAQ:MSFT), Dell Inc (NASDAQ:DELL) and Intel had all been dampened in 2011 over fears of the fall of the PC. Intel’s stock price has begun to recover thanks to the company’s relatively high 3.3% dividend yield.