Intel Corporation Numbers Suggests Inevitable Transition To Cloud Computing

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Intel Corporation Numbers Suggests Inevitable Transition To Cloud Computing
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Intel is changing with the time. The company, which is the world’s biggest maker of PC chips, is now making a major move toward cloud computing.

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Cloud computing more lucrative for Intel

On Tuesday, Intel reported that for the quarter ended September, its PC chips business earned it $8.5 billion, while chips for servers in cloud computing data centers earned it $4.1 billion. Last year, the number was $9.2 billion and $3.7 billion for PC and data center chips, respectively.

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PC chips is still a lucrative segment, but it’s not the same as it was earlier. In contrast, the data center group offers a higher margin. For the quarter, the operating profit from PC chips was $2.1 billion, which was 20% lower than last year, while for data center chips, it was an improvement of 9% from the last year.

Intel has been a late entrant to the mobile segment but is now investing heavily in it and sensors for devices connected to the cloud. Intel’s transition reflects the broader change in the computing industry, and the choice the chip maker makes affects the decision for many other related firms.

Others also changing track

Its not just Intel that is changing its course; other major tech firms are also taking a similar route. On Monday, Dell announced plans to acquire data storage giant EMC. And, in November, another big PC maker, Hewlett-Packard plans to split its storage businesses from its PC segment.

Intel’s transition has been acknowledged by its chief financial officer, Stacy J. Smith, who recently said, “If you zoom out, we’re not a PC company anymore,” adding, “We still work with PC companies, but we’re deeply involved in automotive, wearables, all kinds of new devices.”

Stressing its changed identity, the chip maker in September sponsored a Fashion Week in New York, suggesting an integration of clothing with computing. Even in the cloud business, Intel may face new rivals. Last week, a major chip maker for mobile devices, Qualcomm, announced a big move into chips that work well in cloud systems.

On Tuesday, Intel shares closed down 0.53% at $32.04. Year to date, the stock is down by almost 13% while in the last year, shares are up only 0.41%.

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Aman is MBA (Finance) with an experience on both Marketing and Finance side. He has worked as a Risk Analyst for AIR Worldwide, and is currently leading VeRa FinServ, a Financial Research firm. Favorite pastimes include watching science fiction movies, reviewing tech gadgets, playing PC games and cricket. - Email him at amanjain@valuewalk.com
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