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Intel Desperately Seeking Mobile Momentum

Posting mixed earnings, Intel tries to catch up in mobile while getting ahead in wearable tech and the Internet of Things.
CES 2014: 8 Technologies To Watch
CES 2014: 8 Technologies To Watch
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Intel's fiscal fourth quarter indicates the PC market's ongoing slump might be slowing, but the chipmaker still posted mixed marks. Points of concern include Intel's modest presence in the mobile market as well as its lower-than-anticipated revenue from data center products.

The company reported Thursday that it earned revenue of $13.8 billion, which translates to 51 cents per share, for the quarter that ended December 28. Wall Street analysts surveyed by Thomson Reuters had expected per-share earnings of 52 cents on $13.7 billion in revenue. Intel earned $13.48 billion during Q4 of 2012.

For all of 2013, Intel reported a 1% decline in revenue, to $52.7 billion, as well as slightly larger drops in gross margin, operating income, net income, and earnings per share. The company finished the year with more than $20 billion in cash.

[What will happen to all those XP machines and their networks on April 8? Read Windows XP Won't Go Quietly.]

Intel CEO Brian Krzanich called the performance "solid" during an earnings call with analysts. He emphasized that the company has been investing to get its new line of Atom processors inside more mobile devices. He said its quad-core Atom chip will come to Android tablets in the second quarter.

"We made a shift [to Android]," he told analysts, reminding them that the chips were originally devised with only Windows in mind.

Krzanich said Intel's processors were in more than 10 million tablets by the end of last year, and that the company hopes to reach quadruple that volume by the end of 2014. He also promised dozens of new 2-in-1 devices will hit the market later this year.

Intel makes around two-thirds of its revenue from PC chips, and with the computer market tanking throughout the last year, the company has faced pressure to focus on smartphones and tablets. Time will tell if Intel can make headwind in the competitive mobile space, where most devices run on ARM-based chips. But in the meantime, it can take solace in indications that the PC market might be bottoming out.

Intel CFO Stacy Smith said the PC market is stabilizing. The company reported that desktop volume and average selling prices increased in the fourth quarter, and that it shipped a record number of its Core i7 chips.

With Windows XP set to lose support in April, some analysts expected PC sales would modestly rebound in Q4, as businesses replaced aging systems. But Smith said XP's impending retirement played only a minor role during the quarter.

Intel's chips for data centers performed below expectations. Krzanich indicated healthy demand for chips to power cloud servers but said sales for other data center products were softer than expected. The division posted an 8% year-over-year increase in revenue, but most of the gains derived from a slight uptick in average selling prices. Unit sales improved by only 1%.

Looking forward, Intel expects increased demand for server chips as the proliferation of mobile devices drive the adoption of cloud technologies. The company is also aggressively pursuing new technologies designed for wearable technology and the Internet of Things, both of which were major themes during Krzanich's recent CES keynote speech.

Michael Endler joined InformationWeek as an associate editor in 2012. He graduated from Stanford in 2005 and previously worked in talent representation, as a freelance copywriter and photojournalist, and as a teacher.

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