By Benjamin Pimentel, MarketWatch
SAN FRANCISCO (MarketWatch) -- Intel's big, high-profile push into the mobile arena has been generally unimpressive, and a debate has erupted on whether it should even keep trying.
This was underscored Tuesday when J.P. Morgan analyst Christopher Danely argued that the world's biggest semiconductor company (INTC) should simply get out of a market where it recently reported a big drop in profit.
"We believe Intel should shut down mobile, just like TI," Danely told clients in a note.
TI is Texas Instruments (TXN), another chip behemoth which was once dominant in the cellphone chip market, but which has steadily pulled out of the wireless space.
That shift, which allowed the Dallas-based company to build on its strengths in the analog chip market, has received favorable reviews.
Danely argued that Intel "should follow TI's lead and exit the mobile business, and focus on the PC and foundry businesses where it has an advantage." Getting rid of mobile, he argued, could "unlock" 50 cents a share in earnings per share in 2015.
Danely's note prompted a reply on Friday from Bernstein Research analyst Stacy Rasgon who said he has gotten calls from clients on Intel's future, apparently because of J.P. Morgan's intriguing thesis.
He said clients were particularly intrigued by the idea of Intel emulating TI whose wireless, Rasgon acknowledged, "allowed a healthy core business to shine through."
But Rasgon said Intel is not TI, stressing that the Santa Clara, Calif.-based tech giant faces a much tougher dilemma. Intel's core business is still centered on PCs, a market that's been shrinking. Meanwhile, it faces a crowded field in mobile, where chips using the technology of ARM Holdings (ARMHY) are dominant.
"Very simply put, their market is moving away from them," Rasgon argued in his note. Intel could either adjust to the new market situation, "or risk increasing irrelevance and, potentially, eventual death."
Intel's key advantage remains its enormous lead in manufacturing technology which has enabled it to make smaller, more powerful chips. The company is betting that it could use that edge to catch up in mobile.
Other analysts believe that could happen, and Rasgon says Intel is essentially correct in pursuing that strategy.
"The alternative is they pull back," he told MarketWatch, which could be risky. For if their rivals "close the gap" in manufacturing technology, "the one advantage that Intel has, they're toast," he added.
But, of course, there's no guarantee Intel's mobile push will work and it will almost surely take time, which leads to another problem for the tech giant: Investors may not have the patience for what's bound to be a long slog, he added.
"Maybe they'll have products that are so far ahead in power performance," that could eventually boost Intel's share price, Rasgon told MarketWatch.
"Maybe they'll succeed in the long term, and the stock could go from $15 to $40," he added. "But I don't want to be there for the trip from $25 to $15.
Intel shares slipped 0.1% to close at $26.34 on Thursday.
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-Benjamin Pimentel; 415-439-6400; AskNewswires@dowjones.com
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08-06-14 1716ETCopyright (c) 2014 Dow Jones & Company, Inc.