Intel’s Multiyear Transformation: A Progress Report
Intel’s multiyear transformation
Intel (INTC) is a name that has ruled the computing world. In 2018, the company will complete 50 years—and will undergo the most significant business transformation in corporate history.
Intel started this three-year transformation from a PC (personal computer) company to a data-centric company in 2017, and it has now begun to bear the fruit from this transformation.
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As we witness a technology shift towards AI (artificial intelligence) and IoT (Internet of things) the demand for more comprehensive data solutions is increasing. Intel aims to become a one-stop solution for all data needs by leveraging its vast portfolio of PC and server processors, networking solutions, baseband modems, memory chips, and FPGAs (field-programmable gate arrays). It’s also exploring various applications for its technologies in healthcare, finance, automotive, sports, and other areas.
Impact of transformation on Intel’s earnings
At the fiscal 4Q17 earnings call, Intel’s management stated that the company witnessed its best year in 2017, with its data-centric business of data center, IoT, and programmable solutions segments growing double-digit to record high revenues.
The company’s transformation changed the revenue contribution of data-centric business from nearly 35.6% in 2012 to 45.8% in 2017. Profits rose faster than revenues. Intel CFO (chief financial officer) Bob Swan stated that it was one ahead of the three-year target it laid out at its 2017 Analyst Day.
This transformation has increased the company’s total addressable market from $45 billion to $220 billion. It also created new competitors like NVIDIA (NVDA) and Qualcomm (QCOM), which are also exploring various applications for their technologies.
NVIDIA is a pioneer in AI technology and is ahead of Intel in autonomous driving. Qualcomm is a pioneer in smartphone chipsets and is ahead of Intel in 5G technology. However, Intel with its massive resources is catching up fast in autonomous driving and 5G.
Amid this massive transformation, Intel was hit by Spectre and Meltdown threats in hardware design, which has exposed all its old and new x-86 based chipsets to security risk. Intel has addressed this issue through software fixes and plans to implement hardware fix for these threats in its next-generation products due to launch later in 2018.
In this series, we’ll look at Intel’s PC business and the impact of the transformation on its 2018 earnings.