EFTA01446638.pdf

Deutsche Bank Markets Research Rating Company Date 21 November 2013 Buy Intel Forecast Change Nca t h i kmei lc a United States E•driailve Price at 21 Nov 2013 (USD) 25.22 T INTC 00 INTC US NSM INTC Price target 28.00 Semiconductors 52-week range 25.47 - 19.53 Highlights from Analyst Day Rod. 7*Niii,:re. Taking the gloves off INTC's analyst mtg began with the Chairman stating that to his personal Cob td.O40idv embarrassment the co had "lost its way". We believe this powerful admission Research Anatyst was a positive first step toward INTC returning to growth, with the new CEO's aggressive stance toward entering new mkts further supporting this strategic change. While successful execution on this strategy remains paramount, we believe INTC can return to growth in 2H14/15 as the PC mkt stabilizes and share gains emerge in tablets, phones, foundry etc. Even incremental success ,:?InNec in these areas should yield above consensus rev/EPS and a rising share price. Price target 26.00 to 28.00 I 7.7% Reiterate Buy rating and raise P/T to $28. sow. OnseM an Manufacturing advantage underpins product success ICrlqpr re i GI/an:0 Despite some initial yield issues, Intel believes it can scale transistor costs at 14nm and drive a significant gap between itself and the leading foundry. We 36 believe the lower transistor cost will enable the company to better compete in 32 lower priced segments of the PC, tablet, and eventually the smartphone Ze market. The company outlined goals to boost share in entry level PC from 50% 24 today, ship 40m tablets SoCs (+400% y/y), return to "double digit" growth in 20 DCG, and drive growth in the convertible PC category. le 11/10 911 11/11 912 11/12 5/13 Trim estimates on revised 2o1a guidance —ems Intel guided 2014 revenue to be flat y/y as growth DCG is offset by a decline SW 0001110+% 01•0•644/ PCG. GM is expected to be flat as lower startup charges is offset by increased Performance 1%) lm 3m 12m spending on tablets. The company committed to keep opex flat but we are disappointed the company did not rationalize investment given another year of Absolute 4.5 13.8 30.3 flat/declining revenue. We note Intel investment since 2006 has far outpaced S&P 500 INDEX 2.9 9.3 29.1 revenue growth (page 5). We view the guidance as potentially conservative San. Drury-Me Beat but trim our above-consensus 2014E from $55.6b(+5.7% y/y)/$2.15 to $53.4b(+ 1.5% y/y)/$2.00. Raise; PIT m $.2a Our $28 PIT is based on an EVIS of 2.3x our 2014E revs, a —10% discount to the five-yr avg (2.5x). This PIT equates to a P/E of -14x our 2014E EPS, well below large cap semi peers (16x) but in-line with the S&P500 multiple (14x). Our P/T is further supported by the co's -4% dividend yield and high GM. Downside risks include: slower PC/Server growth and lower ASPs for MPUs & flash memory. Year End Doc 31 2012A 2013E 2014E 1O (PS- 0.53 0.40A 0.42 70 EPS 0.54 0.39A 0.45 3O EPS 0.58 0.58A 0.53 4O EPS 0.48 0.53 0.60 IV EPS 1USD) 2.13 1.90 2.00 Dividend yield (%) 3.5 3.6 3.6 Revenue (USDm) 53341.0 52,599.0 53413.4 Sotet• Beg ono; cc- .'g clot* eroeei el PASITO reeurielte eveeneng el sexe ern pens Deutsche Bank Securities Inc. Deutsche Bank does and seeks to do business with companies covered in its research reports. Thus, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. DISCLOSURES AND ANALYST CERTIFICATIONS ARE LOCATED IN APPENDIX 1. MICA(P) 054/04/2013. CONFIDENTIAL - PURSUANT TO FED. R. CRIM. P. 6(e) DB-SDNY-0100915 CONFIDENTIAL SDNY_GM_00247099 EFTA01446638