When Brian Krzanich took over as Intel’s CEO in May 2013, the global PC market was in the middle of a deep sales decline and the chip maker was desperately trying to gain a foothold in a booming mobile computing market that it had missed out on earlier.
Krzanich said he wanted Intel to learn from its mistakes in mobile by moving aggressively into such growth areas as the Internet of Things (IoT), cloud computing and wearables. Those areas all played a role in Intel generating strong financial numbers in 2014, especially record earnings in the fourth quarter, the CEO said during a conference call Jan. 15.
However, it was Intel’s traditional strengths—data center servers and a stabilizing PC market— that most bolstered its 2014 numbers. Intel’s Data Center Group, which was boosted by the growth in cloud infrastructures, saw revenues in the fourth quarter grow 25 percent over the same period in 2013, and 18 percent year-to-year. The PC Client Group’s fourth-quarter revenues came in at $8.9 billion, a 3 percent increase over the year before. For all of 2014, the PC business saw revenues of $34.7 billion, an increase of 4 percent.
For the quarter, Intel generated $14.7 billion in revenues—a 6 percent increase year-over-year—and a net income of $3.7 billion, a 39 percent increase. The chip maker saw full-year revenues of $55.9 billion, also a 6 percent jump—and net income of $11.7 billion, a 22 percent increase.
“Intel is in a very different place today than we were just 12 months ago,” Krzanich said. “We are participating in a broader range of devices and we are [growing] in emerging segments. These are the trends we’ll build on in 2015, bringing us closer to our vision: If it’s smart and connected, it does it best with Intel.”
Looking forward, Intel executives expect revenue in the first quarter to come in at between $13.2 billion and $14.2 billion, while revenue for the entire year will grow in the mid-single digit percentage range.
IDC and Gartner analysts have been talking about the stabilization in the PC market since last year, after more than two years of sharp sales declines. They’ve noted several factors, including the saturation of the tablet space, Microsoft’s ending support of Windows XP, businesses needing to refresh aging systems, falling prices, and new form factors, including two-in-ones. Intel has been a proponent of driving innovation in the space to create smaller, faster, and less expensive systems that come in a range of configurations.
In the second half of 2014, Intel released Core-M, the first of its 14-nanometer processors. The company followed up this month with the 5th Generation Core “Broadwell-U” chips, all of which will enable OEMs to make smaller and less expensive systems. The innovation will continue later this year with the release of Skylake, which will bring more features to the processors. The impact of such technologies on the PC space is significant, Krzanich said.
“The innovation and the options of the PC market have never been better,” he said. “I’m feeling pretty good about where we are in the PC market.”
Intel Rides Data Center, PC Sales to Record 2014 Revenue
The CEO also said the company did well in growth markets, including the IoT, where Intel generated $2.1 billion in revenue for 2014, up 19 percent over the previous year. Intel has partnered with an array of companies like Fossil, Oakley and SMS Audio to put its silicon into such smart devices as glasses, jewelry and earphones, and at the recent 2015 Consumer Electronics Show, Krzanich introduced the tiny Curie development platform for wearable devices.
Krista Macomber, an analyst with Technology Business Review (TBR), wrote in a research note that “Intel, armed with Curie and a focus on establishing early and deep relationships with IoT hardware vendors and application developers, is poised to ride the wave of IoT disruption to create a new business segment that will return long-term growth and complement its dominance of the PC market.”
The weak spot continues to be in the mobile computing space, which with full-year revenue of $202 million saw an 85 percent decline over 2013. Both Krzanich and CFO Stacy Smith sounded upbeat about the company’s potential in the market, which is dominated by chips based on the architecture from ARM. Intel has qualified the first of its SoFiA systems-on-a-chip (SoCs), which includes an integrated 3G modem.
In addition, 46 million Intel-based tablets were shipped last year, exceeding the chip maker’s goal of 40 million. It came at a cost, as Intel lost millions of dollars by subsidizing OEM’s use of their chips. However, Krzanich said what it also did was establish Intel as a major supplier for the mobile devices.
Going forward on the mobile side, the CEO said he expects Intel’s growth in mobile to pace the overall market trend.
TBR’s Macomber said Intel has some challenges, but it doing what it needs to do to ensure success in the future.
“The mobility space will remain an uphill battle for Intel, and the company will face pressures including from Samsung in the IoT space and early pressures from ARM and IBM’s OpenPOWER Foundation on the data center side,” she wrote. “However, TBR believes that Intel has positioned itself to secure corporate growth above the IT industry average for the long term.”