Intel US$4.21b mobile loss would have sunk most rivals

[SAN FRANCISCO] Intel Corp.'s mobile division reported an operating loss of US$4.21 billion (S$5.6 billion) for 2014, an amount that would erase profits at all but two of the 30 companies on the Philadelphia Stock Exchange Semiconductor Index.

The world's largest chipmaker racked up those losses in a business that reported negative sales in the fourth quarter of 2014. Rather than generate revenue, Intel has been paying customers to use its chips in tablets, trying to build a market presence while it brings out new models that they'll want to buy. In 2014 it got processors into 46 million handhelds.

Only Qualcomm Inc. and Taiwan Semiconductor Manufacturing Co. had net incomes over the past 12 months that were bigger than Intel's mobile loss, according to data compiled by Bloomberg. The extent of that loss hasn't put off investors, who made Santa Clara, California-based Intel the best performer on the Dow Jones Industrial Average last year.

"Most investors are sticking with Intel because they see the growth potential of the data centre group," said Mark D'Cruz, an analyst at Key Private Bank, which owns Intel stock as part of the US$28 billion it has under management. "The company has shown that it's pretty committed to entering into the mobile market, whatever the cost." The server business has put Intel into a profitable niche among companies providing the gear that underpins the explosion for mobile data and services.

Its 98 per cent market share in servers built on personal-computer chips helped that division generate an operating profit of US$7.28 billion on sales of US$14.4 billion in 2014.

COST CUTS

Intel plans to reduce costs at its mobile unit, which is being folded into its PC-chip division, by US$800 million in 2015 as it begins offering cheaper, more capable chips for tablets and phones and pays less in subsidies, the company said.

"We're proud that the company reached these milestones, but we have more work ahead of us in 2015," Intel chief executive officer Brian Krzanich said on a conference call. "A key goal for mobility is to improve profitability."

The stock rose less than 1 per cent to US$36.45 at the close in New York. The shares are little changed this year and jumped 40 per cent in 2014.

BLOOMBERG