Intel is rebuilding itself on three pillars—and the PC isn't one of them

Intel's future is based on the data center, Internet of Things, and memory.

Intel CEO Brian Krzanich
Intel CEO Brian Krzanich speaks at an Intel IoT event in San Francisco on Nov. 3, 2015 Credit: James Niccolai

Intel isn’t really a PC company any more.

No, the company hasn’t stopped making PC processors. But Intel chief executive Brian Krzanich said Thursday that Intel has three key areas of growth: the data center, the Internet of Things, and its emerging memory business. 

Intel reported net income of $3.6 billion from the fourth quarter, down 1 percent from the same period in the prior year. Revenue was $14.9 billion, up 1 percent from the same period. As has been the case, Intel’s Client Computing Group, which houses its PC processors, was responsible for the bulk of the revenue: $8.8 billion, though that was down 1 percent compared to a year ago. Data Center Group revenue climbed 5 percent to $4.3 billion. IoT revenue was $625 million, up 6 percent.

Still, a slight decline in the PC processor business, when measured against a generally no-good, very bad year for PCs, was a bright spot. It’s just that Intel doesn’t apparently regard it as a noteworthy business: “This business provides a foundation of IP and a source of cash flow, but it is not the sole driver of our growth,” Krzanich said of the PC.

What this means: Krzanich’s positioning is somewhat unexpected; for years the server and enterprise processor business was the stable, high-margin portion of Intel that allowed Intel to fund exploratory businesses like IoT. With AMD’s server business stalled until it can release its Zen processor, does Intel see an opportunity to snap up AMD’s remaining market share? Attention is also turning to 3D XPoint, the fascinating memory technology that Intel and Micron unveiled last year. Unfortunately, Krzanich didn’t reveal a launch date or further details for 3D XPoint.

krzanich curie Intel

Intel’s Curie SOC for wearable computers.

A declining PC market? Who cares?

As the data center, IoT, and memory grow within Intel, the company will depend less and less on the PC, and suffer less if and when the market continues to decline. Already, those three businesses generated nearly 40 percent of Intel’s revenue and 60 percent of Intel’s operating profits, Krzanich said. Intel was also fortunate in that it reported record revenue in high-end Core i7 and its “K” gaming processors, helping the average price of its chip platforms to increase by 5 percent.

Intel also completed its acquisition of Altera, the programmable logic company it agreed to acquire for $16.7 billion. Krzanich said that it will begin combining programmable logic and Xeon cores into modules it will use to create custom chips for customers—a tactic that rival AMD has also employed, but using hardwired designs. Intel bought enterprise networking company Avago in 2014 and hopes to expand that business as well, executives said.

Not all the businesses Intel acquires generate direct revenue; Wind River contributed to Intel’s software business, which recorded a rather paltry $543 million of revenue. Intel said only that its Security Group (aka McAfee) revenue was flat—code that it’s not large enough that the government can force it to report revenue. 

Yuneec’s Typhoon H drone James Niccolai

CEO Brian Krzanich shows the Yuneec Typhoon H drone with Intel RealSense at CES in Las Vegas on Jan. 5, 2015

But Altera, Wind River, McAfee, Avago, and others are pulled in to enrich Intel’s core products, surround them with additional logic and services, and make them “sticky” in a way usually associated with software. In this, AMD simply lacks the resources to directly compete; it usually chooses a partnership approach where it can, and has hitched its wagon to the PC.

But anyone who has listened to a Krzanich keynote at CES or even the Intel Developer Forum knows that he sees the embedded Curie processor and the Internet of Things as the future of the company. My belief for the past year or so is that sensors have replaced users as the engines of the data that power Intel’s processors, and the processors Krzanich cares about aren’t the kind that are built into PCs, but wearables, drones, and dashboards. PCs may still power Intel’s bottom line, but there’s the very real sense that the company finds them... well, boring.

This story, "Intel is rebuilding itself on three pillars—and the PC isn't one of them" was originally published by PCWorld.