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Intel-Feature

Intel announced its Q1 2016 results today, and at start glance you wouldn't call back they were anything to write habitation near. The company missed street estimates by $30 one thousand thousand on sales of $xiii.7 billion (a rounding error, basically). While its gross margin dipped somewhat and sales were downwardly compared with Q4 2015, the PC market always turns in a weak first quarter. The company's operating income and net profit were both basically flat — and given the shape of the PC marketplace as a whole, you lot might think that turning in modest revenue growth compared to Q1 2015 would exist welcome news.

Intel-Quarterly

In this case, however, appearances can be deceiving. Intel announced that it would fire up to 12,000 people across the earth, or roughly 11% of its workforce. This works out to approximately ane.2 AMDs, only to put that in perspective. The workforce reductions are necessary, Intel said, "to accelerate its evolution from a PC company to one that powers the cloud and billions of smart, connected computing devices."

Intel went on to reiterate exactly where it feels the growth markets of the future will be. "The data center and Net of Things (IoT) businesses are Intel's principal growth engines, with memory and field programmable gate arrays (FPGAs) accelerating these opportunities."

Missing, you might annotation, are any mention of the PC market place or the company's mobile efforts. ARM fans and general smartphone and tablet aficionados accept snarked at Intel's full general failure to win positive traction for itself in these markets (at least, not without relying on contra-revenue shipments to exercise information technology), but it's important to run across the larger picture hither. Intel began developing Atom all the way back in 2004, non long after it canceled Tejas, the ill-fated, Prescott successor that never saw the low-cal of mean solar day. While information technology can be fairly criticized for some of its specific product decisions, clearly some of the executives at Intel saw how big mobile could be years earlier smartphones and tablets started eating the PC's lunch.

More than simply a down cycle

We spoke to Anshel Sag, an analyst with Moor Insights & Strategy, for his opinion on what Intel'south layoffs and new focus on information centers, IoT, and memory technologies similar 3D XPoint mean for the company. "Intel is making major cuts in their overall headcount; many people accept seen this coming for years," Sag said. "But ultimately, today's earnings and restructuring bear witness that Intel no longer considers itself a consumer company outset and that it does non see growth for itself in the client calculating business."

Apollo-Lake3

Intel's low-cost platform pitch is congenital around lowering costs, not driving increased performance

Nosotros concord. Intel isn't literally giving upwardly on the PC space, but for decades the visitor has relied on the consumer CPU market to provide the bulk of its profits, even if other market place segments were far more than assisting on a per-unit basis. The company previously portrayed its client business equally driven by a virtuous cycle of continuous investment that protected profits and drove engagement. Now, it'southward claiming that other market segments volition provide this growth.

Intel will continue to innovate next-generation CPUs, and it'll clearly continue to market those devices as compelling upgrades. Just the visitor is pivoting, trying to find spaces where it can earn the kinds of returns investors want to see, while cutting headroom anywhere else to prop its figures up in the meantime.

Incidentally, anyone who thinks Intel is sitting on spare PC operation it hasn't released due to a lack of competition should take a hard wait at this situation as proof for why it'southward not true. If Intel could release dramatically faster hardware that consumers wanted to buy for the aforementioned reasons they kept ownership in for more 30 years, information technology would exercise and so. The fact that it'southward focusing on new business segments and firing thousands of people is proof that it doesn't know how to return to the skillful erstwhile days of semiconductor scaling.

AMD will announce its own Q1 2016 results in several days. Don't await miracles or anything good.