Intel, the leading PC chip maker, is seeing declines in the PC market, and thus, it is making a shift to higher-growth businesses such as server chips and embedded chips for cars. It is possible that this could help the company’s shares surge by a massive 25%, as stated in a report published in the financial publication Barron’s on Sunday.
Will soon return to sustainable growth
Intel is scheduled to report earnings on Tuesday, and the risk stands that the chip maker will cut its financial guidance for the year. The publication added that the company may return to sustainable growth by the year’s end — for the first time in seven years.
The report’s author advises investors that if they do not own Intel, they should wait until the earnings call to buy. Barron’s said the demand for personal computer chips has declined rapidly and has caused Intel to struggle, but it is hoped that the growth of Intel’s data center group, which includes server chips, will bring in more revenue eventually.
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In the past five years, the gap between the two businesses has been narrowing. Last year, Intel’s data center reported operating profits of $7.8 billion, slightly less than $8.2 billion generated by the client computing division (chips for desktop and notebook computers).
In 2010, the data center division generated $4.4 billion in revenue, while the personal computer business generated $13 billion. Last year, a minor contribution of just 4% was made by the company’s Internet of Things division, which includes chips for cars, medical devices, drones and factories. Now the growth of this division is at a high single-digit pace.
Apollo Lake from Intel
In other Intel news, the chip maker has come up with a next-gen system-on-a-chip called Apollo Lake to inject life into the budget category. The chip is not only more compact but also very efficient, thus making it possible for PC makers to slim things down without making many compromises. For instance, it allows them to use smaller batteries without any negative impact on the battery life.
Intel’s Apollo Lake chip has more to offer than just saving size and cost. Its graphics technology comes from its Skylake architecture, which offers full hardware-based 4K video playback and provides an overall boost to visual performance. At the same time, it offers richer support for technologies like USB-C, which drag lower-cost computers into the modern era.