Intel Sees Strong Q3 Despite Poor Mobile Numbers

Even as it works to diversify its products, Intel's PC and data center chip businesses continue to show strong results.

Intel CEO Krzanich

Intel has spent a lot of effort and money over the past several years trying to diversify its portfolio by extending its reach into such areas as chips for mobile devices in hopes of reducing its reliance on PCs and servers.

However, it is the PC and data center businesses that are driving the chip maker's financial fortunes, making up for a mobile business that continues to post dismal numbers. According to Intel officials, the third financial quarter was no different.

In the quarter, Intel saw revenues hit $14.6 billion, an 8 percent increase over the same period last year and net income reached $3.3 billion, a 12 percent jump. Sales for the PC Client Group grew 9 percent, to $9.2 billion, while the Data Center Group—which includes processors for servers, networking gear and storage appliances—reached $3.7 billion, a 16 percent increase.

The quarterly financial numbers were strong despite the $1 billion loss in the Mobile and Communications Group, which includes processors for smartphones and tablets. The business lost $810 million in the third quarter of 2013, and revenue in the most recent quarter came in at $1 million, significantly less than the $353 million last year.

Intel officials are looking at a combination of in-house innovation and outside partnerships to help it grow in a market that is dominated by the likes of Qualcomm and other vendors that make systems-on-a-chip (SoCs) based on the ARM architecture.

"From a product standpoint, you saw throughout this year that we did a very good job of as we figure out how to get into this market and work with our customers and partners," CEO Brian Krzanich said Oct. 14 during a conference call with analysts and journalists, adding that the company is on the right track in mobile despite the harsh numbers from the third quarter.

Some analysts were surprised at the performance of the mobile business, despite what they say are solid products.

"Intel has warned that the group would be a major problem for the next couple of quarters," Jack Gold, principal analyst with J. Gold Associates, wrote in a research note. "While they have many good things in the pipeline, it’s surprising how low the sales results were. I expect it will take at least 3-4 quarters before Intel can right this group’s ship."

The chip maker continues to make moves in the mobile space. Krzanich noted that systems powered by a new "Bay Trail" Atom product will start hitting the shelves as the holiday season nears, and the company is still on schedule with its 3G SoFIA offering—an Atom SoC with Intel's 3G wireless modem—due at the end of the year, and an LTE SoFIA SoC in the first half of 2015. That will be a significant step for Intel; according to Krzanich, 15 percent of notebooks sold in 2018 will be LTE-enabled, and that baseband attached to tablets will double by that year.