Intel Capitalizing on Significant Cloud Growth

Intel, the leader in semiconductor chip makers, saw record revenue in 2014 primarily due to cloud related industries. Total 2014 annual revenue climbed 6 percent in 2014 to $55.9 billion, while $11.7 billion of that was net profit.
What’s astonishing is that the growth was not attributed to any one specific cloud sector; rather, quite a number of cloud areas saw healthy growth in 2014, including Intel’s datacenter business. Intel’s Data Center Group saw 18% year over year growth, which was second only to Intel’s PC Client Group, in terms of revenue performance. The primary factors that were credited for their datacenter business growth was a 15% increase on platform volumes and an additional 10% increase in selling prices for this unit.
A more comprehensive breakdown of Intel’s cloud growth is as follows:

  • Intel’s software and services unit revenue grew 1 percent to $2.2 billion.
  • Quarterly datacenter revenue (Q4 2014) jumped 11% to $4.1 billion – 25% increase over Q4 2013.
  • Quarterly Internet of Things Group unit revenue (Q4 2014) increased to $591 million – 12% quarter over quarter and 10% YoY.

While Intel still predominantly focuses on their core business – its PC Client Group, the trend looks as if Intel will be making a massive cloud push over the next several years, which may end up encompassing most of their annual revenues in the not so distant future. Intel CEO Brian Krzanich indicated this on the earnings call a few days ago by saying, “We said we would capitalize on the growth of the cloud and big data by diversifying customer segments.”
Yet, it’s not all wonderful for Intel, as they saw their mobile and communications division deteriorate 85% year over year to $202 million in revenue. The operating loss within its mobile division alone stood at $4.21 billion in 2014. A loss of this nature would surely bankrupt virtually any other company, however with the large diversity of Intel’s portfolio and the nice growth among their other units, they were able to withstand the mobile beating. Still, it seems that Intel is committed to being a main player in the mobile market, which can be seen by their plans to cut their mobile division costs in 2015 by $800 million.
Even with the decline in mobile though, investors are still sticking with Intel, and rightly so. Intel’s cloud sectors are performing so well that they are the divisions that are driving profitability and overall growth. “Intel is in a great position to benefit from the build out of the cloud and data analytics as we enter 2015. We expect these trends to drive growth again this year,” said Intel CFO Stacy Smith. As for investors, they seem to agree with Smith’s assessment of Intel’s cloud dominance. Mark D’Cruz, analysts at Key Private Bank, noted, “Most investors are sticking with Intel because they see the growth potential of the data center group.”