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Why Intel can afford to play the long game in the war for phones and smart devices

Mark Hachman | Jan. 19, 2015
Microsoft chief executive Satya Nadella has made no secret of his vision for Microsoft: cloud first, mobile first. On Thursday, Intel CEO Brian Krzanich unveiled his own mantra. And no, it's not "Intel Inside."

"I'll tell you that market reception in the channel so far for the Intel tablets has been very strong," Krzanich said. "There is a strong brand value just in Intel inside a tablet, no matter who is the manufacturer."

And that's the other truth in the computing industry. Intel essentially has bought its way into some markets with a tactic the company calls "contra revenue" dollars that pay for some of its partners' costs, marketing and otherwise. But hardware makers still value the Intel name. 

So far, the pillars of Intel's success have been the PC, especially the notebook, as well as the tablet. PC prices have now sunk below $200, but Intel has ridden out the storm. Intel began the year expecting its PC Client Group's revenue to decline in the low single digits. Instead, Intel exited the year with a 4 percent increase in revenue and a whopping 25 percent increase in operating profits. Tablets and notebooks see similar trends, Krzanich said: yes, some dirt-cheap tablets will push the average price down below $100. But enough $299 to $399 tablets will be sold to help keep Intel's hardware partners happy. 

And don't look now, but Intel's Internet of Things business is at $591 million and rising. So far, Intel's missed out on the market for wearables, which are powered by TI OMAP processors, ARM chips, and other power-sipping embedded chips. But Intel's learning.

It's hard to say whether will Intel will dominate the mobile and IoT space as it has the PC. Frankly, it doesn't look likely. But the point is that Intel has the leisure to engineer what customers want while it keeps printing money in the server and PC space. Eventually Intel will learn how to connect these smart devices. And while the connected devices of tomorrow may not necessarily work best with Intel inside, chances are they'll work damn good. 

 

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