Intel has lost $2bn in mobile so far this year

Q2 results show resilience in PCs, growth in Chromebooks, but continuing struggle to turn mobile processors into profits

By Caroline Gabriel

The PC may be changing shape as unpredictably as a Transformer, but it is not being replaced by the smartphone or even the tablet, if Intel's latest results are anything to go by. While tablets are eating up much of the older form factor's growth, there is also considerable buoyancy in devices with large screens and keyboards, particularly Google Chromebooks. As it continues to struggle in mobile, it will be essential for Intel to keep its x86 processors inside those products, rather than cede them to lower cost ARM-based providers.

In Intel's second quarter financial report, mobile losses continued to mount, but PC revenues held up surprisingly well. Overall, the company reported record quarterly microprocessor shipments, and added $1bn to its year-ago revenue figure, turning in $13.8bn for the quarter. Operating income was $3.8bn, net income $2.8bn and earnings per share 55 cents.

Intel did not give exact processor shipment numbers, but credited that business with its strong figures, and particularly singled out Chromebooks and its low power Bay Trail system-on-chip. Slow to get the power-efficient SoC right in the past, Intel was in danger of ceding not just the handset market, but all the emerging new post-PC form factors, to ARM-based rivals. However, Bay Trail and other upcoming SoCs have finally given the company an offering which can genuinely go up against ARM in the low power game.

"With the ramp of our Bay Trail SoC family, we have expanded into new segments such as Chrome-based systems, and we are on track to meet our 40m unit tablet goal," CEO Brian Krzanich said in a statement. "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." The 14nm shift, together with 3D transistors, will put Intel ahead of the field in terms of process, indicating the advantages of its control of its own production, and enabling it to reduce power, size and cost of chips further.

Other upcoming chips for the year include Cherry Trail for tablets, which will ship by the end of the year, and Broxton, the next generation low-power Atom chip. Next year, Intel will release Skylake, for PCs and tablets.

However, the mobile and communications group continues to struggle. Its revenue was down 67% on Q114, and 83% year-on-year, to just $51m, a drop in the ocean for a company which has often acknowledged that mobile expansion is critical to offset the decline of the PC. The group lost $1.1bn in the quarter and has lost $2bn already this year.

Intel has come very late to the smartphone party, and despite some recent design wins and a much improved offering, it still has important disadvantages compared to Qualcomm, notably the lack of a fully integrated processor/modem solution for LTE - essential for low cost, low power handsets.

CFO Stacy Smith recognized the urgency of the situation, saying that, if Intel cannot integrate mobile connectivity into communications within 3-4 years, it will be locked out of critical segments of the market. Many would say Smith was being optimistic on the timelines.

Krzanich said on the analyst call: "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. As we turn into SoFIA [the all-in-one SoC family], you'll see a family of product really targeting this space and that's how we become profitable."

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