Intel mobile division bled $2 billion so far this year

Posted on Wednesday, Jul 16 2014 @ 14:21 CEST by Thomas De Maesschalck
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Intel posted net income of $2.8 billion for the second quarter of this year but despite the good overall results of the company there's some less rosy news in the financial results.

The rotten corpse in Intel's closet is the company's Mobile and Communications Group - net revenue of this division was down from $292 million in Q2 2013 to just $51 million in Q2 2014 and the division lost a whopping $1.1 billion in the second quarter alone. Total losses for the first half of the year amount over $2 billion as Intel is selling these chips at a loss in an attempt to capture marketshare in the mobile market.

It's hard to estimate though how many mobile chips Intel is selling because the company is reporting net revenue for the segment, meaning revenue after all discounts, rebates, returns, and other considerations have been calculated.

Intel's success in other markets enables the company to sustain the heavy losses it suffers in the mobile market. Intel CEO Brian Krzanich explained to investors that he believes that over time, Intel will be able to turn this into a profitable business. For comparison, AMD's total revenue in the first quarter of this year was just under $1.40 billion. These figures really illustrate how big the financial divide between Intel and AMD has become.
The reason it’s important to keep that in mind is because normally we think of revenue as being tied to sales volume. If a company sells widgets for $50 each and reports $500 million in income, it’s easy to ballpark how many widgets it may have sold. With Intel shipping its tablet parts contra-revenue, this relationship is much more difficult to predict. Intel’s $51 million in net revenue doesn’t mean the company only sold $51 million of Bay Trail hardware — it means it only recognized $51 million of net revenue after other costs were accounted for. One further setback Intel acknowledged on the call is that its own XMM 7260 modem has apparently once again run into ramp trouble. It initially expected that the product would qualify in Q2 for Q3 production, but now predicts an early Q3 qualification cycle with production ramping up at the end of the year. Executives also acknowledged that the market is pivoting hard away from 2G and 3G solutions — a tacit admission that its older silicon may face a steep decline in sales.
Source: ExtremeTech

About the Author

Thomas De Maesschalck

Thomas has been messing with computer since early childhood and firmly believes the Internet is the best thing since sliced bread. Enjoys playing with new tech, is fascinated by science, and passionate about financial markets. When not behind a computer, he can be found with running shoes on or lifting heavy weights in the weight room.

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