Intel Bets On Android For The Future

Intel Is Placing Its Bets On Android For The Future. The company’s mobile unit volume was up year-over-year for the first time since Q2 2012, while the desktop units were flat year-over-year, with all-time record core volume and mix. Intel’s Data Center revenue grew 11% year-over-year and the enterprise segment was again in positive territory, up 3% from the last year, while cloud, networking and storage were all up in excess of 20%. The newly formed Internet of Things Group, grew 32% year-over-year, with particularly strong demand in in-vehicle infotainment and retail.

Barron’s highlights Pacific Crest’s Michael McConnell, reflecting on the latest data on production of tablet computers, forecasts shipments of the devices this quarter will decline to 27% growth from 30% in Q2 of last year, and 59% in Q2 of 2012. He thinks an apparent maturation in tablets, broadly speaking, is a positive for Intel:

With tablet production falling into negative territory for the first time ever in Q1, and year-over-year unit shipments anticipated to decelerate in Q2, we believe the form factor is showing signs of maturation. Due to slowing market penetration of tablets and lengthening replacement cycles, we believe tablet cannibalization of consumer-based notebooks could begin to ease going forward. Since tablet growth rates began to decelerate in 2Q13, notebook ODM shipments have shown improvement on a year-over-year basis, improving from a low of -15% y/y growth in 2Q13 to -5% y/y in 1Q14, as shown in the table to the right. We believe this trend, coupled improving corporate PC demand, to be positive for INTC. Conversely, we believe maturing tablet growth rates to be a modest negative for ARMH. We estimate notebook processors/chipsets comprise ~33% of Intel sales, and we have modeled tablet processors to comprise ~17% of ARM royalties in 2014.

At Mobile World Congress in February, the company announced multiyear multi-device agreement with Lenovo, ASUS, Dell and Foxconn to expand availability of Atom-based smartphones and tablets. Intel set an aggressive goal of shipping 40 million tablet SoC this year. More than 90 designs on Android and Windows and shipped 5 million units in the first quarter, placing the company squarely on track for that goal.