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Intel's Mobile Losses Result in Financial Reporting Changes - Analyst Blog

Chipmaker Intel CorporationINTC , tired of losses from mobile, has decided that it will no longer report mobile earnings separately. Instead, it will merge its Mobile and Communications Group with its PC business into a single new division called the Client Computing Group.

The change in the financial reporting structure will be effective from the first quarter of 2015 itself, which the company is set to report on Apr 14.

Other business segments, including Data Center, Software and Services, Other, and the Internet of Things groups, would all remain unchanged.

Why the Change?

The Client Computing Group will comprise core processors for notebook PCs, 2 in 1 laptop-tablets, desktop computers, tablets, smartphones, mobile products as well as wireless and wired connectivity products.

The formation of a new client unit can be attributed to the way consumers increasingly use devices. Currently, two-in-one or convertible systems can be used either as a conventional notebook or a tablet. Smartphone screens continue to get larger while those on tablets get smaller, giving rise to what are being termed as "phablets."

The reorganization will allow Intel to improve operational efficiency as it counters competition from Arm Holdings ARMH , a U.K.-based company to improve its position in mobile devices, a market dominated by chips based on designs from Arm Holdings.

The major reason is that Intel's Mobile and Communications Group has been incurring losses. The mobile division has lost more than $7 billion since 2012. Morgan Stanley said the division lost $4 billion in 2014. In fact, Intel reported operating loss of $4.21 billion in 2014, greater than a loss of $3.1 billion in 2013.

In 2014, it managed to ship 46 million tablets, ahead of the targeted 40 million. But the losses did pile up. One reason is that it has been making payments to tablet manufacturers to persuade them to use its chips. Intel said in Nov, 2014 that it will try to enhance mobile segment profitability by $800 million in 2015.

On the other hand, its PC business has been minting money. The highly profitable business pulled in over $27 billion since 2012. It posted massive profits of around $14 billion in 2014.

So the new division, of which the PC business is a major constituent, will be extremely profitable, even with the mobile unit incurring losses.If the mobile division losses were included in the computing segment last year, the division would still have made a $10 billion profit

Other Stocks to Consider

Intel currently has a Zacks Rank #4 (Sell). Investors can also consider Linear Technology Corporation LLTC and NVIDIA Corporation NVDA , both carrying a Zacks Rank #2 (Buy).

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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