Intel Moves Forward with Transition Away from PCs

In an SEC filing and through its backing of a cloud-focused startup, the chip maker is pushing ahead with efforts to focus on IoT and data centers.

Intel PCs

Intel officials continue to push the chip maker away from the contracting PC space while putting more attention on areas such as the data center, cloud, connectivity and the internet of things (IoT).

In a filing this week with the Securities and Exchange Commission (SEC), company officials reiterated the strategy that they call the "Virtuous Cycle of Growth" that sees Intel technology not only powering the rapidly growing number of smart, connected devices and systems that make up the internet of things, but also in the data center systems that drive the clouds that connect the devices and analyze the massive amounts of data that they generate.

Within that scenario, PCs become simply one of the many connected IoT devices, along with everything from wearable technology to medical devices to industrial systems.

At the same time, Intel Capital—the chip maker's investment arm—led the latest round of funding for Velostrata, a startup whose technology is designed to make it easier for enterprises to easily move compute workloads between their data centers and public clouds. The company announced Aug. 3 that it had raised $17.5 million in the latest round, led by Intel Capital.

All this comes months after CEO Brian Krzanich outlined Intel's new initiative in a post on the company blog. While PCs remain part of the company's plans, its future will be keyed by the IoT, cloud and data centers, Krzanich wrote in April.

"Our strategy itself is about transforming Intel from a PC company to a company that powers the cloud and billions of smart, connected computing devices," he wrote. "We head into that future with tremendous assets and advantages: our spirit of innovation, our technology and manufacturing leadership, and the trust of our customers."

In the Form 10-Q filing with the SEC, Intel officials said their "vision is if it is smart and connected, it is best with Intel. … As more 'things and devices' become smart and connected to the cloud, there is greater demand for data centers to not only connect these devices, but also to capture and analyze the data they create. In addition, our improvements in memory technology and field-programmable gate array (FPGA) technology will enable new classes of platforms that meet customer needs in the 'cloud and data center' and 'things and devices' market segments."

All of that is pulled together through connectivity, they said.

The PC market has been in decline since late 2011, as the popularity of smartphones and tablets began to grow. Shipments have declined as business users and consumers have held onto their older systems longer, spending more of their money on the mobile devices while seeing little incentive to embrace new PCs. In the second quarter, shipments fell year-over-year by as much as 5.2 percent, according to Gartner analysts, though both they and IDC analysts said that with the expiration of Microsoft's free Windows 10 upgrade program and the popularity of two-in-one systems, the decline in the market could slow.

However, PC and component makers have made efforts to migrate the focus of their businesses away from PCs and toward emerging trends like the IoT and cloud.

At Intel, the transformation hasn't been easy. While its Data Center Group (DCG) has seen solid growth in recent quarters, the Client Computing Group (CCG) still is the company's top revenue generator. In the second quarter, CCG saw $7.3 billion in revenue, a 3 percent drop from the same period in 2015. DCG generated $4 billion, up 5 percent.

In addition, the chip maker is cutting 12,000 jobs, and has undergone a significant executive shakeup that has seen the departure of several long-time veterans after Krzanich hired ex-Qualcomm executive Venkata "Murthy" Renduchintala to oversee such areas as client devices and the IoT. There also are reports that Intel is considering selling its security business.

All this comes among growing competition from such players as ARM and its array of partners, including Qualcomm and Samsung, as well as IBM and its OpenPower initiative and an Advanced Micro Devices that is undergoing its own transformation.

However, Intel officials believe they have the technologies in place—not only the traditional PC and server chips, but also the FPGAs (from its acquisition of Atera), non-volatile memory, and for now at least security—to push forward with the company's transformation.

"Further enhanced by the economics of Moore's Law, the Virtuous Cycle of Growth drives synergistic growth" among Intel's various groups, they said in the SEC filing.