Intel: Inside or Outside?

Intel Inside or OutsideThe physicist Gordon Moore, one of the three founders of Intel, postulated in 1975 empirically that the technology would double the number of transistors on a chip every two years.

We all remember the advertising slogan “Intel Inside”. It is true that the processors of the American group equip 85% of PCs and 92% of servers. Intel is an ultradominant actor, that made one of the best stock market performance of the technology sector in 2014 (+ 30%).

True, but… After two years of declining PC market, 2014 owes its salvation to the forced migration of computers still equipped with antediluvian Windows XP, which has provided the supply for the demand. This effect should dry up soon.

Above all, the smartphone and tablet have become the new “personal computers”, relegating the PC to the status of mere desktop. Now the competition from mobility challenges the Intel position. An overwhelming majority of these terminals are not equipped with chips made by Intel, which at the moment is “outside” of the market of over one billion units and growing.

Obviously, Intel does not remain idle. Management tries at great cost to win its place in this area, dominated by the British ARM (95% market share in smartphones) and its allies (Qualcomm, Mediatek, Apple, Samsung).

$3 billion lost

Thus Intel sells processors virtually at the cost price or less, while providing substantial subsidies to anyone who will retain its processors.

Despite its financial strength – Intel has net cash of $11 billion – the company’s efforts were unsuccessful.

The results are clear: in the first nine months of the year, the mobile industry has only earned $208 million in revenue and charged 3 billion in losses. Why such a failure? Its technology is designed for the PC world, where you have to deliver more power without really worrying about the power consumption and price. It’s just the opposite in mobility.

The question is how long Wall Street will tolerate such results in mobility. What will Intel customers do once it stops its grant program? What can be the growth driver, while Intel is no longer a favorite on the Internet of Things? So many questions that management to decide on promptly if it wants Intel to remain “inside”.

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