Intel should “give up” on mobile – JP Morgan

By Graeme Burton
08 May 2014 View Comments
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Intel should give up on the "money pit" of mobile, according to JP Morgan analyst Christopher Danely.

In a research note, Danely suggests that Intel has already basically lost in mobile and ought to concede defeat.

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"We continue to believe Intel will lose money and not gain material EPS [earnings per share] from tablets or smartphones due to the disadvantages of x86 versus ARM, and the overall low profitability of the tablet and handset processor market," he wrote.

He continued: "Even if Intel were to gain 25 per cent of the tablet and smartphone processor market over the next three years, we estimate it would contribute $2.8bn (5 per cent) to revenues, but result in a loss of roughly $0.18 [per share]."

In other words, while Intel could achieve a significant market share in mobile devices, it will make a loss doing so. While the challenge is partly architectural - most of the high-performance mobile market is now based on ARM designs - it is also fiercely competitive, meaning that Qualcomm is the only silicon vendor that has been consistently successful in mobile, according to Danely.

Qualcomm, wrote Danely, is "nearly two years ahead of the industry... We believe Qualcomm's leadership in LTE [fourth generation wireless] has enabled the company to easily stave off competitors such as Broadcom, Intel, Nvidia and Marvell that offer inferior LTE modem technology."

Danely noted that Intel had been slow to recognise the importance of LTE, especially in terms of the high-end smartphone market, where the standard quickly became a must-have.

Danely was writing after Intel's first quarter earnings in which it reported mobile computing results separately. These showed that the company lost $929m in "mobile and communications", while revenue fell by 52 per cent, year-over-year, to just $156m, as the company struggled to persuade device makers to build products around its microprocessors instead of ARM.

Intel, though, is unlikely to follow his advice, given the importance of mobile to the future of computing.

Intel CEO Brian Krzanich has admitted that the company "missed" mobile during the 2000s, but said that it isn't going to miss out on wearable computing. "We are catching up. I should just start out with admitting that," Krzanich said in an interview with CNBC at the end of April.

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