Yahoo Finance Intel’s future platforms will help it avoid contra revenue
Intel's growth strategy and offerings in the PC market (Part 10 of 17)
Intel’s mobile business recorded huge loss in 2014
As we saw earlier in this series, Intel’s (INTC) mobile business posted a loss of about $4.2 billion in fiscal year 2014. The loss is substantially higher than the $3.15 billion loss in 2013.
In its November 2014 investor meeting, Intel’s CFO, Stacy Smith, stated that he expects the loss to reduce by ~$800 million to $3.4 billion in 2015.
In 2016, Intel expects another big reduction in mobile loss. However, the chances of breaking even are remote in 2016. As a result, Intel’s plans to break into the mobile market are actually costing the company a huge amount of money.
The above chart shows Intel’s research and development. It also shows the Mobile and Communications Group’s, or MCG, proportionate allocation in total research and development in 2014.
In its 2014 investor day conference, Intel’s CFO, Stacy Smith, stated that a significant part of MCG’s cost structure includes allocated costs—like the development of 7nm and 10nm future nodes. It includes validation, testing, and core design.
You can consider investing in the Market Vectors Semiconductor ETF (SMH), the Powershares QQQ Trust (QQQ), or the Technology Select Sector SPDR Fund (XLK) to gain exposure to Intel. Intel makes up about 19%, 3.41%, and 3.55% of these ETFs, respectively.
Future platforms are claimed to be free from bill of materials issue
Intel realized that the contra revenue issue is serious. This was the company’s step to strengthen its place in the chip space. ARM Holdings’ (ARMH) chip designs are very popular in the chip space. It called contra revenue a short-term issue. It tried to placate its investors and shareholders by saying that the future platforms won’t suffer from this.
As we saw earlier in this series, Intel stated that the future platforms—low-cost SoFIA products and its high-end platform known as “Broxton” expected in 2016—are expected to not have the bill of materials deficiency that hampered Bay Trail.
Cherry Trail will be replacing Bay Trail. It supports Microsoft Windows 8.1 and Google’s (GOOG) (GOOGL) Android. Intel’s mobile chip business is expected to benefit from SoFIA. It combines a processor with cellular communications capability.
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