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Inside Intel: Efforts to become lean while maintaining innovation leadership pays off

May, 1 2017, 6:05 AM

Editor's note: Intel’s efforts to become lean while maintaining innovation leadership pays off, delivering an 8% overall year-to-year growth in 1Q17, says Technology Business Research Analyst Daniel Callahan. ​

HAMPTON, N.H. - Intel’s 1Q17 results released last week mark continued growth of a more diversified chipmaker that is no longer seeking to rely on PC and server processors.

Intel revenue rose 8% year-to-year to $14.8 billion in 4Q16, marking six quarters of growth after a 0.6% revenue decline in 3Q15. Intel’s traditional businesses, Client Computing and Data Center, defied market trends with growth of 6% and 6% to $8 billion and $4.2 billion, respectively.

The chipmaker’s double-digit year-to-year gains of 11% in Internet of Things, 55% in the Non-Volatile Memory Solutions group, and 18% in the Programmable Solutions Group showed that while the processor remains Intel’s core business, the company is scaffolding its PC and data center processors with continued investments in new markets.

One new market for Intel is the artificial intelligence (AI) market. TBR believes the establishment of the Artificial Intelligence Products Group in 1Q17 is one step in many Intel has taken to become an AI market maker.

Intel realizes data is becoming the common thread across vertical solutions and business processes, and Intel seeks to become the first-stop component shop for vendors serving customers seeking solutions for the data revolution. Intel leadership observes AI as an opportunity to deliver both software and silicon that enables AI-driven products and services. Intel has the potential to benefit from those direct component sales and indirectly through data center and cloud server sales as well as an increase in data capacity needs.

This strategy is not without risk for Intel. The company will have to divert significant R&D, M&A and S&M into developing its AI go-to-market and selling the entire market on it. This would be a surer bet if other major companies, such as Google, IBM, Microsoft, AMD, and NVIDIA were not competing with the same conviction as Intel.

(C) TBR





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