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Intel reports sinking mobile revenue

Posted: 17 Jul 2014  Print Version  Bookmark and Share

Keywords:Intel  CPU  LTE  mobile  2G 

Intel has announced a remarkable increase in net income during its Q2 revenue report, as well as record quarterly microprocessor shipments. However, the positive news has been downplayed by massive losses in its mobile unit.

For Q2, Intel reported revenue of $13.8 billion (a $1 billion increase from a year earlier), along with operating income of $3.8 billion, net income of $2.8 billion, and earnings of 55 cents per share. A spokesperson credited the microprocessor shipment record for the results, though specific shipment numbers were not given.

"With the ramp of our Baytrail SoC family, we have expanded into new segments such as Chrome-based systems, and we are on track to meet our 40 million unit tablet goal," said CEO Brian Krzanich. "In addition, we hit an important qualification milestone for our upcoming 14nm Broadwell processor, and expect the first systems to be on shelves during the holidays."

Revenue increased across multiple groups. PC client group revenue rose nine per cent from Q1 and six per cent from a year earlier to $8.7 billion. Desktop platform volume in this segment rose eight per cent from a year earlier, and ASPs increased two per cent. Notebook volume rose nine per cent, while prices decreased seven per cent.

Data centre and Internet of Things group revenues increased more than 10 per cent each to $3.5 billion and $539 million, respectively. The software and services operating segments reported revenue of $548 million, down one per cent from Q1 but up three per cent from a year earlier.

Still, the company reported a significant decrease in revenue in its mobile and communications group, which dropped 67 per cent from Q1 and 83 per cent from a year earlier to $51 million.

Stacy J. Smith, Intel's CFO and EVP, attributed this decrease to losses in the 2G, 3G and multi-communications sectors as the industry transfers to LTE. If the company cannot integrate mobile connectivity into communications within three or four years, Smith expects it to be locked out of a critical market.

Ross Seymore, an analyst at Deutsche Bank Equity Research, said Intel's mobile revenue will be spurred by the launch of the 3G version of its SoFIA platform in Q4 and the LTE generation next year. Krzanich shared his optimism.

"I believe, over time, we can make this a profitable business. We have some ground to make up in moving LTE to Category 6 and having our products designed for this segment," Krzanich said. "As we turn into SoFIA, you'll see a family of products' really targeting this space and that's how we become profitable."

Additionally, Intel's board of directors authorised an increase of $20 billion to its share repurchase program and plans to increase share repurchases. The company used $2.1 billion to repurchase 74 million shares of stock in Q2, and it expects to spend $4 billion in share repurchases in Q3.

"This change in our capital structure is the continuation of a multi-year focus on creating value and returning cash to our shareholders," Smith said.

Looking forward, he expects revenue to increase four per cent in Q3 to $14.4 billion and gross margins to increase to 66 per cent. This would be driven by lower platform unit costs and higher platform volumes, which would be partially offset by lower selling prices.

- Jessica Lipsky
  EE Times





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