The company is planning to improve growth by conquering IoT business market share.
Since 2016, Intel Corporation stock has plummeted down by 14% mostly because of slow demand for its PC chips. In 2015, its revenue from PC and mobile devices chips went down by 8%. Its revenue from datacenter missed Intel’s target of 15% growth and only had an increase of 11%.
The only consolation for the company was its Internet of Things (IoT) business. The company commenced the segment of the business in 2013. Through the venture, it anticipates the likely evolution of connected devices.
By the year 2020, the $134 billion organization projects the number of connected devices to reach the height of 200 billion from the current standing of 15 billion as of 2015. In coherence with such projection, the U.S. based company has produced Curie and Edison, a button-sized module and SD card-sized module for wearable and smart appliances respectively. The new IoT system on chips (SoCs) has longer batter lives but less horsepower.
However, these microchips cannot be sold at the premium price of $100 of Intel products. In December, in Credit Suisse tech and telecom conference, Intel’s CEO Brian Krzanich was asked how he would turn the $0.07 microchip into something profitable. Krzanich did not deny the fact that the microchips could not be sold at high prices, he stated that the chips do not necessarily have to be profitable but they can be essential for the datacenter business. He further added, “I look for anything that feeds the data center. And I try to feed that.”
In terms of revenue, the IoT business grew by 7% in 2015 to $2.3 billion. The company did not provide an actual breakdown of the revenue but it reported that it had experienced double-digit growth in retail, transportation, and video segments. Intel’s rival ‘Qualcomm’ has been reported to sell $1 billion IoT chips in the year 2014.
Although the Santa Clara, Calif. firm’s IoT business revenue increased last year, its operating income fell down to $515 million – a 12% decrease. Although Intel did not disclose the real reason behind the swinging profitability of the microchips, the Taiwanese chipmaker MediaTek’s latest attempt to develop IoT chips for wearable devices might have tarnished the company’s market share.
Although, the IoT has strong future growth, it cannot generate much revenue for the company, which could overshadow the soft growth in chips for mobile devices and PCs.
At the market close on Friday, Intel stock price stood at $29.04. The 52-week range of the stock is $25 to $35.