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Intel's internet of things, datacenter units post strong Q2 growth

UPDATED: Intel's business is still tethered to PCs, but the growth prospects for the company ride with the enterprise and internet of things.
Written by Larry Dignan, Contributor on

Intel's internet of things division and the datacenter unit posted second quarter growth of 24 percent and 19 percent, respectively as the company delivered stronger-than-expected financial results.

The company's second quarter results weren't a surprise. Last month, Intel said that the financial picture would be better than expected due to the corporate PC upgrade cycle.

Special Feature: M2M and The Internet of Things

Intel reported second quarter earnings of $2.8 billion, or 55 cents a share, on revenue of $13.8 billion.

Wall Street was expecting earnings of 52 cents a share on revenue of $13.68 billion for the second quarter.

By unit, Intel's datacenter group delivered second quarter revenue of $3.5 billion, up 19 percent from a year ago. The internet of things division delivered revenue of $539 million, up 24 percent from a year ago.

However, Intel's results are still tethered to the PC upgrade cycle. The PC unit delivered second quarter revenue of $8.7 billion, up 6 percent from a year ago.

As for the third-quarter outlook, Intel projected revenue of $14.4 billion, give or take $500 million, with gross margins of 66 percent. Intel also said that 2014 revenue will be 5 percent, up from its previous projection of flat revenue. Gross margin for the year will be about 63 percent.

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In a statement, Intel CEO Brian Krzanich said the company's expansion into Chrome-based systems and launch of its Baytrail processors have the company "on track to meet our 40 million unit tablet goal." For now though, Intel remains a show-me story on the mobile front since second quarter revenue was $51 million, down 83 percent from a year ago.

By the numbers:

  • R&D spending was $2.86 billion, up from $2.5 billion in the second quarter a year ago.
  • The company had $104,900 employees at the end of the quarter.
  • PC unit volume was up 9 percent from a year ago with average selling prices down 4 percent.
  • Server unit volumes were up 9 percent and average selling prices were up 11 percent.

UPDATE: During the quarterly shareholders call, Intel CEO Brian Krzanich reiterated that the consumer PC segment, especially in emerging markets remains challenging.

Nevertheless, Krzanich maintained an optimistic outlook, positing "there are some signs of renewed consumer interest and activity."

Furthermore, Krzanich noted that Intel shipped approximately 10 million tablets during the quarter, maintaining the processor giant is firmly on track to meet its previously-stated goal of 40 million worldwide by year's end.

Not straying too far from the script, Krzanich and Intel CFO Stacy Smith repeatedly stressed the successes in the enterprise market, observing growth of 15 percent or more across most business segments in Q2.

Krzanich attributed growth here to a myriad of moving parts, including new price points, the end of Windows XP, and more diversity in form factors.

"We see it at least lasting through this year," Krzanich predicted. "That's built into our forecast, so that's kind of as far as we're looking out today."

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