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JPMorgan: Mobile is unprofitable for Intel

Posted: 09 May 2014  Print Version  Bookmark and Share

Keywords:Intel  mobile  x86  processors 

Intel has to shed its mobile and communications group to improve profitability and break out of the earnings slump the first quarter of this year has seen the company in, according to JPMorgan Chase analysts. Then again the x86 giant does not seem to think so and at least one other analyst agrees that Intel should stay and stand its ground in the fiercely competitive smartphone and tablet market.

"We continue to believe mobile is unprofitable for Intel," a JPMorgan Chase statement read:

We continue to believe Intel will lose money and not gain material EPS from tablets or smartphones due to the disadvantages of x86 versus ARM and overall low profitability of the tablet and handset processor market. If Intel were to shut down its mobile business, we estimate it could unlock roughly $0.50 in 2015 EPS.

Earlier, Intel came up with its 14nm SerDes chip as a way to compensate for weak sales in the mobile market and reinforce its message of technical superiority—staking its claim to the title of industry's leader in semiconductor design and manufacturing, despite competitors' claims that the company is caving in to short- and long-term obstacles (see SerDes chip shines a spotlight on Intel's 14nm process).

The mobile and communications group saw a $3.1 billion operating loss in 2013, with 1Q 2014 losses hitting $929 million and revenues at $156 million. While Intel officials acknowledged the loss, several were quick to call recent financial numbers an "investment" in the mobile ecosystem.

"This is definitely more of an investment—a well understood strategy for Intel's computing leadership perspective," Julie Coppernoll, vice president of Intel's mobile and communications group, told EE Times. "We feel that we have a plan, we understand how we're going to deliver, and are making investments that improve our particular competitiveness from a platform cost perspective."

Rather than take JPMorgan's suggestion to shut down mobile, as Texas Instruments did, and refocus efforts on higher-margin PC and foundry businesses, Intel reaffirmed its commitment to tablets and LTE. Growth in Intel architecture will be one of the biggest in mobile, Coppernoll said, and the developing tablet market will quadruple the company's volume.


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