Forget Intel Corporation's PC "Problems" -- It's A Buy

Though its stock price has inched up since it reported earnings on April 14, investors clearly weren't too enthusiastic about Intel's first quarter results. As with its mobile partnerMicrosoft , analysts and investors seem to be spooked by Intel's "reliance" on PCs -- which was fine when the PC market was booming, but is hurting the stock now.

Here's the thing: while revenue in Intel's Client Computing Group declined 8% year over year to $7.4 billion last quarter, this result simply isn't the concern so many investors and industry pundits think it is. In fact, a couple of recent analyst upgrades show that even some on the Street are finally beginning to understand the "new" Intel -- which is not just about PCs.

A recap of Q1Intel's first quarter 2015 total revenue was virtually identical to 2014's $12.8 billion, which at first glance was ho-hum at best. Spending and operating income were also flat, but thanks in part to a lower tax rate in Q1 -- 25.5%, compared to last year's 27.7% -- net income eked out a 3% increase.

That's nothing to write home about. Intel naysayers might also point out that its 8% improvement in quarterly earnings per share -- $0.41, up from last year's $0.38 -- was helped by having approximately 200 million fewer diluted shares outstanding compared to 2014. But there's more to consider.

Now for the rest of the storyWhile revenue in the Client Computing Group declined, this drop was fully offset by big jumps in revenue from the Data Center and Internet of Things (IoT) business units. This growth is very important as Intel CEO Brian Krzanich is continuing his mission to move Intel further into these burgeoning markets. Even Intel's mobile efforts, while still the weak link of Krzanich's transition plans, enjoyed a couple of recent wins.

Of all Intel's results last quarter, its 19% year-over-year jump in Data Center sales is perhaps the most exciting for long-term investors. Why? Because much of Intel's success in the Data Center unit comes from growth in the cloud. According to one report, by 2018 global traffic in the cloud will more than quadruple from 2013 levels.

By 2016, Software-as-a-Service alone delivered via the cloud is expected to top $100 billion in annual revenue. That doesn't include hosting, data analytics, and infrastructure, among other revenue-producing opportunities. And Intel's shift to less reliance on PCs and more on data centers is working. This time last year, data centers made up 24% of Intel's total revenue. This year? That figure has jumped to 29%, at the "expense" of Intel's PC unit.

Last but not leastWhile certainly on a smaller scale than data center results, Intel's emphasis on IoT-related sales is also working. Last quarter, IoT revenue jumped 11% year over year to $533 million. Like other IoT players, including Microsoft with its expanded big data solutions based on its Azure cloud platform, Intel is in the early stages. This translates to plenty of opportunity ahead.

Krzanich has made it clear that IoT will continue to play a more significant role in Intel's future, which makes perfect sense. After all, much of the data collected via all those IoT sensors and devices installed in cars, homes, and even cities will be stored in the cloud. This means Intel's strategic IoT growth plans are a natural extension of its data center efforts.

In addition to its PC results, Intel naysayers are quick to point out its lackluster mobile results, and they're right. To date, mobile has been a consistent money-losing proposition for Intel, which likely played a big part in its recent decision to roll mobile sales results into the new Client Computing Group.

That said, recent mobile wins, including supplying the chip for the AsusAndroid OS ZenFone 2 and Microsoft's widely heralded new Surface 3 -- the affordable tablet that can replace your laptop -- are steps in the right direction.

But make no mistake: data center and IoT results are what long-term investors should focus on. And those, along with Intel's nearly 3% dividend yield, continue to impress, which is why Intel should still be near the top of a growth-and-income investor's short list.

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Tim Brugger has no position in any stocks mentioned. The Motley Fool recommends Intel. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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