5 Things Intel Corporations Management Wants You to Know
Shares of Intel have soared nearly 30% over the past 12 months, fueled by robust growth in its PC and server businesses. In previous articles, I discussed the chipmaker's core strengths and weaknesses . Today, let's take a look at five statements CEO Brian Krzanich made during the company's fourth quarter earnings call which are worth revisiting.
Source: Flickr, Stockmonkeys
1. PC growth exceeded estimatesGlobal PC shipments slipped 0.2% year over year in 2014, according to Gartner. Since Intel respectively controls 82% and 90% of the desktop and notebook processor markets (IDC, 3Q14), that anemic growth should have weighed down its earnings. Yet Intel's PC business, which accounted for 62% of its top line in 2014, defied expectations and grew. That growth also surprised Krzanich, who stated:
2. Slimmer PCs are good for IntelIntel's growth in PCs was fueled by rising demand for slimmer devices which use its new Broadwell CPUs, the first 14nm processors in the world. The Broadwell family includes the low-power, fanless Core M processors and beefier fifth generation Broadwell U (Celeron, Pentium, Core i3/i5/i7) processors. Speaking of the development of Broadwell chips, Krzanich stated:
Growth in Ultrabooks, 2-in-1s, and Chromebooks is important to Intel, since those devices are expected to steadily replace traditional laptops and desktops. Gartner expects worldwide shipments of "traditional" PCs to drop 7% annually this year, while shipments of "ultramobile premium" devices -- like Apple'sMacBook and Microsoft'sSurface Pro -- are expected to rise 59%. Gartner also expects Chromebook sales to nearly triple between 2013 and 2017.
Apple's new MacBook sports a Core M CPU. Source: Apple
3. Mobile growth topped expectationsIn response to being marginalized by ARM Holdingsin smartphones and tablets, Intel tried to attract mobile partners with steep discounts on Atom chips, co-marketing agreements, and financial assistance in redesigning logic boards.
That strategy helped it gain hardware allies likeLenovo, Asus, and Dell, but it was a costly one. Last year, the mobile division posted a loss of $4.2 billion, down from a loss of $3.1 billion a year earlier. Nonetheless, Krzanich stated that tablet processor shipments exceeded expectations:
Yet 46 million tablets represents just 21% of global tablet shipments in 2014. Since Gartner expects the tablet market to only grow just 8% annually this year (down from 68% growth in 2013), it's unclear if those market share gains were worth spending billions on.
4. Intel loves wearablesResearch firm Canalys expects wearable band shipments to soar 129% annually to 43.2 million units this year. ARM-based processors are already installed in many Samsung and Android Wear smartwatches, but Intel has been securing wearable partnerships beyond smartwatches as well. Krzanich highlighted these new developments:
Looking ahead, those partnerships will benefit Intel's new Internet of Things (IoT) division. Last year, revenue at the division climbed 19% year over year to $2.14 billion as operating income rose 12% to $616 million.
Intel's Basis Peak smart watch. Source: Intel
5. Intel will profit from the growing cloudIDC believes that spending on public IT cloud services will rise from $56.6 billion in 2014 to over $127 billion in 2018. Since Intel controls 98% of the global server market, its Data Center business -- which accounted for 26% of its 2014 revenue -- is well positioned to profit from that growth. Krzanich acknowledged that, stating:
The key takeawaysIn conclusion, Intel's PC business will benefit from more power efficient CPUs, its wearable business will keep expanding, and its near-monopoly of the server market will profit from higher demand for cloud-based services. Overall, Intel's core growth engines remain strong, and the stock remains fairly cheap at just 12 times forward earnings.
The article 5 Things Intel Corporations Management Wants You to Know originally appeared on Fool.com.
Leo Sun owns shares of Apple. The Motley Fool recommends Apple, Fossil, Gartner, and Intel. The Motley Fool owns shares of Apple. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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