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As PC market stabilizes, Intel focuses on smartphones

Mark Hachman | April 17, 2014
Inside Intel's family of chips, communications is now its problem child.

On Tuesday, Krzanich reiterated that Asus, Dell, Foxconn and Lenovo had committed to long-term contracts to use Intel's chips — although how many products each vendor will ship remains unknown.

For now, Intel is in investment mode. "We don't go into these businesses believing we are going to lose money," Krzanich said, noting that the company has set milestones to achieve to reach profitability.

For now, though, that's exactly what's happening. Intel's Mobile and Communications Group lost $929 million for the quarter, on $156 million in revenue. Part of that is due to the fact that Intel's radio business is a step behind its rivals both from a technology and from an integration perspective. However, Intel's 7260 baseband processor will ship this quarter, Intel executives said.

According to Patrick Moorhead, principal at Moor Insights and Strategy, the 7260 "is going to be a really good competitor," Moorhead said. The challenge will be how well Intel can integrate it, he said, especially with Qualcomm employing the same strategy.

But in a weird way, that's okay. Intel's manufacturing technology, according to Krzanich and Stacy, is about two years ahead of its competition. That's helped shoulder rival AMD into more of a fringe player in certain segments. And with that, sources that analyst Moorhead talked to say that Intel's prices for "Romley" Xeon E5 chips climbed by 20 to 40 percent once AMD stopped supplying the market with a competing product. In other words, Intel is using its traditional high-margin businesses to fund new investments. 

"Intel can increase prices to fund new areas like mobility," Moorhead said.


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