Why the Best News For Intel Investors Isn’t Improving PC Sales

September 16, 2016, 4:30 PM UTC
Photograph by Bloomberg via Getty Images

Venkata “Murthy” Renduchintala, who oversees several of Intel’s biggest businesses as president, stopped by Fortune’s offices last week on the day the new iPhones were unveiled to talk about his view of the future.

The hour-long conversation ranged from big data and machine learning to new wireless technologies like 5G to what it was like to jump to Intel from competitor Qualcomm after 12 years. One topic that didn’t come up: The PC market.

And that’s because virtually all of the strategies that Murthy and Intel CEO Brian Krzanich have outlined are about finding other areas, markets that are actually growing, to restore Intel to its former glory. The future of Intel is about moves like getting its modem chip inside the new iPhone 7, buying machine learning startup Nervana Systems, and divesting a poorly fitting security software unit.

So investors probably should be less excited about Friday’s news from Intel. The company announced that in the third quarter it would bring in more revenue and be more profitable than it had previously forecast. The stock immediately jumped 4%.

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But the reasons Intel (INTC) offered for the better than expected results should be less than thrilling for investors in the company’s future. Intel said PC makers were building up inventories and PC demand might be stronger than they had thought.

That’s consistent with other signs that the PC market was, perhaps, cratering at a slower rate than predicted. Second quarter PC shipments declined 4.5%, less than the 7.4% initially projected, market watcher IDC reported over the summer. And Intel is finally ready to start shipping its next generation line of PC chips, dubbed Kaby Lake.

And that’s all well and goodin the short term. If the PC market shrinks at a slower rate, Murthy and Krzanich will have more time and more resources to pull off their transition. But the fact that the PC market isn’t dying quite as quickly as the worst projections doesn’t tell investors and analysts anything about whether Intel’s strategies to find new areas of growth are working.

With the iPhone 7 finally arriving in customers’ hands on Friday, it was the subject of various teardown reports by experts who have all the weird screwdrivers needed to take the device apart (three different exotic screwdrivers were required to disassemble the iPhone 7). And what they found confirms the long, long rumored victory for Murthy and Krzanich. Two critical models of the iPhone 7 include a modem chip made by Intel, not Qualcomm (QCOM), which was the sole supplier previously.

For more on Intel’s future moves, watch:

In Murthy’s meeting at Fortune, he still wasn’t willing to discuss the Apple chips victory openly. But he clearly laid out the company’s plan to use the evolution to 5G wireless technology over the next few years as an opportunity to leapfrog leaders in the current 4G wireless environment, such as Qualcomm. Intel could also double down on its iPhone modem win by fabricating other chips for Apple (AAPL) in the future.

So while shareholders may celebrate the less bad news in the PC market, long-term investors should raise a glass to the reports from the weird screwdriver gang.

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