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The Intel Chips Are Down

Commensurate with the declining popularity of PCs is the declining need for Intel’s chips.  This, along with some missed opportunities and lack of vision has Intel entering into a massive phase of restructuring.  Somewhere around 12,000 employees are slated for layoff.

The weakening of the personal computer market is mostly as the result of consumers hanging onto their PCs for a longer period of time rather than replacing them, including purchasing new technology such as tablets or laptops rather than swapping out old computers.  Additionally, storing data to the cloud, Windows 8, and lack of mobility are some of the other causes of death to PCs.

Intel will shift its focus from the business of PCs to the internet of things (IoT) and connected wearables.  Smartwatches, bracelets and Google Glass promise to be the future of the technological market.  Fitness trackers are a combination of technology and fashion.  Connected wearables are such that datastreams are provided to servers where programs then determine personal statistics like just how much sleep or exercise an individual may require meeting a certain goal or end.  The IoT equips people, buildings, devices and vehicles with technology that brings them all together by the exchange of data.

That is not to say that Intel will be ignoring mobile products and back-end servers.  Demand for server processors is still strong in light of cloud computing and business communications.  To that end, Intel just closed on its purchase of Altera, a company which produces reprogrammable gateway chips Intel is utilizing in its server chips.  Intel is also introducing a robust memory and storage configuration called Optane which Intel claims is far denser than dRam and 1,000 times faster than flash storage.  Intel needs to keep an eye on rival chip makers such as Google where the word is that, in conjunction with Rackspace, is promising to promote IBM and Qualcomm chips. 

Intel will also continue to innovate PC chips but is angling away from the level of reliance it has had in the past on chip sales focusing more on the cloud and big data.  More importantly, Intel is emphasizing connectivity pointing out that the cloud, IoT, big data and memory are all bound together.  The company is striving to connect everything from retail to vehicles to the cloud.  Finally, memory and programmable solutions fill the remainder of Intel’s technological plate.  Clearly, the cloud underlies the majority of Intel’s undertakings and is first priority for the company meaning cloud connectivity will be the underpinning for Intel products.

Mobile devices thus far have not been a huge success area for Intel with few smartphones utilizing its chips.  Intel is having a far better success rate with tablets; although, they, too, are experiencing a reduction in shipments and have cost Intel billions of dollars in an attempt made too late to be a formidable player in the smartphone arena. Nevertheless, the company is proposing to do away with the common headphone jacks replacing them with C-USB-type jacks across the board.  Smartphone manufacturers and distributors are screaming their objections to the proposal; however, Apple is already undertaken such a strategy so as far as Intel’s concerned, it is just a matter of time.  Based on its past failures in the realm of mobile devices, Intel is set on making its mark — finally — on smartphones.

Unfortunately, Intel’s restructure comes at another price as mentioned above — 12,000 jobs out of a total of around 104,800 employees worldwide.  That is, 11% of Intel’s workforce will be laid off over the next year along with consolidation of work locations around the world.  Management also sees the coming and going of players such as the recruitment of a Qualcomm mucky muck, resignation of its mobile chief, retirement of the PC business chief and IoT chief, and juggling internally of CFOs and marketing managers. 

The bottom line is, well, the bottom line.  Revenues were only 2% for PC and mobile chips and up 9% for the Data Center Group.  Simply, Intel’s IoT and Data Center comprised 40% of its overall revenue last year.  The layoffs will save the company over 750 billion dollars.  The restructuring overall promises to be quite profitable.  The chips may be down, but they’re certainly not out.