What Intel Corporation (NASDAQ:INTC)’s Mobile Reorganization Means
Is Intel Corporation (NASDAQ:INTC) bailing out of the mobile market? No, the company is only retooling so that it can be in an excellent position to cut losses and ride the next wave of mobile growth. In other words, Intel has decided to kill its line of mobile chips in the low end mobile market.
Particularly earmarked for removal is the Atom line of processors, which has been a loss-leader in Intel Corporation (NASDAQ:INTC)’s mobile business. Intel desperately tried but failed to win the mobile market in its strategy of courting Chinese low-cost handset producers. The company’s mobile revenue contracted from $1.7 billion in 2012 to just $202 million in 2014, marking an 89% decline in mobile sales. But as mobile revenues shrank, operating losses in mobile division soared, hitting more than $4.2 billion in 2014 from $1.8 billion in 2012.
As mobile losses mounted, Intel decided to somewhat bury the mobile story inside its PC business.
Intel’s mobile woes
Intel Corporation (NASDAQ:INTC)’s mobile challenge can be traced to the company’s late entry to the market. Competition from ARM-based chips is also making it difficult for Intel to grow rapidly in the mobile market. For example, ARM-based processors are perceived to be cheaper, thus more suitable for low-cost smartphones, a market that Intel wanted to break into by courting Chinese handset makers.
Pursuit of higher returns
In the new mobile dispensation at Intel, the company wants to focus its efforts and resources on products that generate higher returns. In that position, Intel wants to increase investment in wireless and wireline technologies as it drives the connection of all things – people and devices.
Intel’s push in 5G works
As Intel Corporation (NASDAQ:INTC) retools in mobile, the company is also training its eyes on 5G infrastructure. The company has partnered with companies such as Nokia Corporation (ADR) (NYSE:NOK), Verizon Communications Inc. (NYSE:VZ) and Ericsson to enable it ride the wave of 5G network upgrade. But in that market, Intel will have to face off with Qualcomm, Inc. (NASDAQ:QCOM), which is also hunting for new growth opportunities in 5G upgrade as demand for its mobile chips shrink and the competition catches up.
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