Intel Earnings: Data Center Revenue Soars As Mobile Revenue Tanks

Intel reported strong growth in key areas of its PC, data center, and IoT business for 2014, but challenges remain for the chip giant as it tries to tackle the tablet and smartphone processor market, according to the company's fourth-quarter financial results released Thursday.

Intel reported earnings of 74 cents per share on $14.72 billion in revenue. Intel beat quarterly analyst expectations set by Thompson Reuters, which estimated the chip-maker would report fourth-quarter earnings per share of 66 cents on $14.71 billion in revenue.

"The fourth quarter was a strong finish to a record year," said Intel CEO Brian Krzanich. "We met or exceeded several important goals: reinvigorated the PC business, grew the data center business, established a footprint in tablets, and drove growth and innovation in new areas. There is more to do in 2015. We'll improve our profitability in mobile, and keep Intel focused on the next wave of computing."

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Intel partners said it's been a great year, thanks to a massive migration by business off of the now unsupported Windows XP operating system.

Intel partners said that business has nearly mirrored the success Intel has seen over the past year with the launch of key products, such as Xeon server chips.

Intel reported its Data Center Group revenue was up 18 percent from 2013, totaling $14.4 billion. For the fourth quarter, the Data Center Group reported revenue was up 11 percent compared to the previous quarter. Its Client PC Group reported revenue up 4 percent for 2013 ($34.7 billion), but down 3 percent in the fourth quarter ($8.9 billion) compared to the previous quarter.

"There is no doubt end-of-life of XP has sparked an uptick in our client sales. But now we are seeing a demand soften," said Eric Stromquist, executive vice president of CTL, an Intel partner based in Beaverton, Ore.

Another growth area for Intel has been its Internet of Things business, which gave the company a revenue bump of $2.1 billion for 2014 (up 19 percent from 2013) and $591 million for the fourth quarter (up 12 percent compared to the previous quarter).

While Intel said it exceeded its goal selling chips for tablets and mobile phones, its Mobile and Communications Group reported negative revenue of $6 million for the fourth quarter, and a $202 million revenue decline for the year, down 85 percent from 2013.

Intel said it expected to lose money in the mobile chip space as it battled entrenched leaders Qualcomm and Samsung, which use ARM-based chips that account for most of the mobile market. At the beginning of 2014, Intel vowed it would put its chips in 40 million Intel-powered tablets by year's end to seed the market.

"Our customers would give Intel the edge over ARM-based devices," Stromquist said. "But the problem is Intel needs more design wins and to give customers a stronger reason to buy tablets with 'Intel Inside' over ARM."

Intel's software and services operating segments reported revenue of $557 million, which was flat sequentially and down 6 percent year-over-year.

Intel also released 2015 expectations that include revenue growth in the mid-single-digit percentage points. Revenue expectations for the first quarter, according to Intel, are $13.7 billion, plus or minus $500 million.

In a post XP-refresh market, in 2015 customers are eagerly anticipating more details around Microsoft's upcoming Windows 10 operating system, Stromquist said. "We see Windows 10 as driving the next wave of PC refreshes."

PUBLISHED JAN. 15, 2015