Intel will soon stop being a PC-centric company

Intel has been trying to reduce its dependence on the PC business by moving into data-centric businesses such as the Internet of Things, which includes automated driving. These made up 47 percent of revenues in fiscal 2017, so in the next few years, the PC could become a minority.
Written by Jack Schofield, Contributor
Graph of annual revenues for Intel Microsoft IBM1987-2017

Intel and Microsoft were relatively small companies who benfited when IBM used their products in its industry-redefining IBM PC in 1981. They are now working to reduce their dependency on the declining PC market.

It's a struggle for most established IT companies to change their core businesses, as IBM has found. Intel is trying hard, and in its latest financial results, released on Thursday, only 53 percent of revenues came from its PC business. The rest came from data-centric operations, including the IoT (Internet of Things). This includes autonomous driving.

In a statement, Intel's chief financial officer Bob Swan said: "Intel's PC-centric business continued to execute well in a declining market while the growth of our data-centric businesses shows Intel's transformation is on track."

Intel's data-centric businesses grew by 21 percent in the fourth quarter (excluding McAfee). Assuming continued growth, these should soon bring in more than the "client computing" (PC) business.

The shift is being given a boost by Intel's $15.3 billion purchase of Mobileye, which is based in Jerusalem in Israel. It only added $128 million to fourth-quarter revenues, but it makes Intel's Automated Driving Group a major player in a growing market. Mobileye's EyeQ camera and sensor technologies - used by 27 car manufacturers - fit with Intel's car technologies, which include mobile connectivity and cloud support.

Intel's Client Computing Group still provided half of its revenues and roughly two thirds of profits: $34 billion in sales and $13bn in profits in 2017. Most of the rest came from the Data Centre Group, with $19.1bn in sales and $8.4bn in profits. However, other divisions are starting to make significant contributions. These include IOTG (the Internet of Things Group) with $3.2bn, NSG (the Non-Volatile Memory Solutions Group) at $3.5bn, and PSG (the Programmable Solutions Group) at $1.9bn.

NSG makes Optane memories and 3D NAND flash chips for SSDs, while PSG includes field-programmable gate arrays (FPGAs).

Intel has also shipped its first generation Nervana Neural Network Processor to its first customer.

In 2017, these non-PC technologies helped Intel grow its annual revenues by 6 percent to a record $62.8bn. This follows a recent period where Intel has struggled to make much progress, as the graph above shows.

Intel has increased its target for 2018 from $62.2bn to $65bn, but there must be some uncertainty about the effects of the Meltdown and Spectre vulnerabilities. Will some customers delay purchases?

During a conference call about the financial results, Intel CEO Brian Krzanich said: "We're working to incorporate silicon-based changes to future products that will directly address the Spectre and Meltdown threats in hardware. And those products will begin appearing later this year." That could increase sales.

The end result may well depend on whether malware writers come up with any exploits that bypass the various software and firmware mitigations that are now being introduced. And that's an unknown.

See also:
Intel posts strong Q4, rides data center group and says it'll restore confidence in its security efforts

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