Intel’s Semi-intelligent Strategies For The Future

Intel Corporation (INTC) is the global leader in semiconductor technology. It manufactures microprocessors and chipsets for desktops, portable PCs, servers, and, more recently, for tablets, smartphones and wearable technologies.

Intel is heavily dependent on its PC Client Group business segment, and PC sales have traditionally been a driving force for Intel. However, a secular decline in the PC industry has hurt its profits, and smartphones, tablets and wearable technology will be the key revenue drivers for Intel in the future.

Threats to traditional businesses

Intel’s microprocessors and chipsets are widely used in PCs, desktops and servers, and their demand drives Intel’s revenues. Due to a decline in the PC industry, Intel’s revenues fell 1.6% year-over-year (YoY) in 2012.

Intel sells its products directly to Original Equipment Manufacturers (OEMs) – companies that manufacture PCs for consumers and enterprises. In 2012, Intel’s three major customers were the Hewlett-Packard Company (HPQ), Dell Inc. (DELL), and Lenovo Group Limited (LNVGY), which respectively accounted for 18%, 14% and 11% of Intel’s revenues.

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Intel – Only a Tablet Can Cure Ailing Revenues

Intel Corporation (INTC), the leader in microprocessors for PCs, lagged behind in the smartphone and tablets markets by missing on the bandwagon, and concentrating on the declining PC market. The company lowered its guidance for 2014, bringing price down by 5.4%. Unlike his predecessors, Brian Krzanich, Intel's CEO, openly accepts the company’s lost position and is ready to manufacture chips for other chipmakers in order to capitalize on the competitive advantages that Intel still enjoys in the semiconductor industry.

Lowered guidance and missed revenue estimates have become prevalent among traditional tech giants. Earlier this month, Cisco Systems, Inc. (CSCO), the data networking equipment leader, lowered its guidance and expects an 8-10% decline in its revenues due to headwinds in emerging markets and slow order growth from service providers. International Business Machines Corporation (IBM), another tech giant, missed on revenue estimates consecutively for the sixth quarter due to a decline in orders from its growth markets. Microsoft Corporation (MSFT) did not lower its guidance for this quarter—having learnt its lesson in the preceding quarters, it was quick at changing its strategy so as to avoid future declines.

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Intel Announces “Conflict-Free” Microprocessors and Software Rebranding

Chemical elements such as tungsten, tin, and gold are essential in the production of computer chips. However, they are often sourced from countries which are in the grip of armed conflict, such as the Democratic Republic of the Congo, where workers are mistreated and forced to work in brutal conditions. In fact, a tussle over the control of mineral wealth is one of the major factors of the unremitting violence in the DR Congo. According to a report by the United Nations Security Council Committee, these “conflict minerals” are a source of wealth for armed groups, and are contained in several other electronic devices.

A few years ago, President Barack Obama had signed a federal law that requires computer companies to investigate and report whether their products contain minerals from these affected areas. The law was part of the Dodd-Frank Act, passed in July 2010.

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Intel Misses Earnings Estimates in Fourth Quarter

Intel Corporation (INTC) has announced its fourth quarter (4Q) results for fiscal year 2013 (FY13), reporting a revenue beat but has missed earnings per share (EPS) estimates. The company generated revenues of $13.83 billion, which were higher than consensus estimates of $13.7 billion, whereas EPS at $0.51 was a cent lower than estimates.

Intel’s revenues from its PC division - which contributes more than 60% of total revenues - were flat year-over-year (YoY). The number of units sold rose 3% YoY, but average selling prices (ASPs) declined 2%. Revenues from the data center division increased 8% YoY, driven by a 7% increase in ASPs.

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