Intel’s new CEO and Atom chip face uphill climb to mobility

Intel announced earnings Wednesday that were in line with expectations, but the chipmaker is facing a daunting future as mobile devices further erode the PC business and its Atom chip vies for customers.

“With its new, low-end Atom processor, Bay Trail, the company is gaining traction in cheap notebooks and tablets, but we believe this is at the expense of higher-end core processors,”said Piper Jaffray analyst Gus Richard. “Intel is late to the smartphone market and we believe high-end smartphone sales are starting to roll over. Intel is far behind its competitors in terms of cost and integration in smartphones, in our view. We do expect Windows 8.1 to drive a corporate upgrade cycle next year, creating a bounce in PC demand.”

Intel’s new CEO Brian Krzanich said organization, strategic, and prioritization changes “will drive greater emphasis on our Atom-based products, bringing the full weight of our process and architectural leadership to the Atom family.”

Asymco’s Horace Dediu illustrates the dynamics of Intel’s situation — he calls it a “PC calamity” — which is similar to the situation facing Microsoft, a dominant leader in the PC era facing a steep uphill climb in the mobile era.

In the last six years, nearly as many iOS and Android devices have been sold as PCs and mobile ARM devices are selling at least 2.6 times the rate of Intel-powered devices.

(Credit: Asymco)

“In terms of installed base, a computing category that did not exist six years ago has come to overtake one that has been around for 38 years,” Dediu wrote. “The calamity for Intel has been that they have had no part to play in the new category. Perhaps that is because they had every part to play in the old category.”

As you would expect, during the Intel earnings call Krzanich was optimistic about the potential for Atom processors to get traction in the fast-growing mobile space.

“Look at it as a constant pushing of the accelerator down and the thing just gets faster and faster as time goes by. And so you’ll just see more and more strength of that Atom line as time goes through here, and it will be kind of just, you’ll look back and say well it’s obviously that the Atom line has truly become strong and they’ve got share in the tablet space,” he said.

Intel trimmed its annual financial outlook from low single-digit percentage growth to to flat year over year.

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