On the face of it, it would seem quite difficult for an industry giant to lose money in a fast growing market that generated $3.3 trillion in 2014. But Intel managed it. The ‘mobile technologies’ industry generated that much, according to Boston Consulting Group. Meanwhile, Intel’s Mobile and Communications Group lost over $1 billion a quarter last year, compiling losses of $4.2 billion for 2014. This is strange.
Overall, we should be clear, Intel is bouncing along nicely, with total revenues hitting $55.9 billion last year, up 22 percent on the previous year.
Strangely, too, its Internet of Things division was up 19 percent and its Data Center business was up 18 percent.
So, why is mobile pulling the company down?
The obvious answer is that manufacturers are not using their chips, which are seen to be notoriously power hungry.
The less obvious answers vary, but certainly Intel did not seem to be ready for the fierce competition of the mobile market.
It also seems that the company is ‘investing’ in the market by essentially paying OEMs to use their chips, going for the approach of just getting the chips into devices at any cost. Well, at a cost of $4 billion or so. This approach is, surely, flawed. If you have to pay someone to use your product then your product is clearly not that good.
There probably is no single reason for the situation. As this publication suggests, the company was faced with a ‘perfect storm’ of pressures. From the fact that Apple and Samsung are so dominant; the historical approach to developing chips; the company’s early and erroneous bet on netbooks; its PC background and even the CV of CEO, Paul Ottelini, who excelled when PCs ruled the world but apparently is not agile enough when it comes to mobile.
Whatever the reason, the company needs to do more than bury its mobile and communications unit in the sand, sorry, another business, thus avoiding the need to report its dire performance. The fact is that the mobile market is now so far beyond even being called a market that it needs to get its act together. If it does not, then ARM and the others will not only keep it outside the mobile arena, but also the IoT and others. And with the PC quickly giving way to tablets and smartphones, Intel needs to rethink, and quickly, in order to get back inside.