Internet of things drives Intel revenues

Intel made more than half a billion dollars from the "internet of things" in the last quarter, the latest sign that the heavily hyped market is starting to become a significant revenue driver for tech companies.

Breaking out sales for the first time from what Intel calls "embedded" systems in retail, transport, industrial and domestic products, the chipmaker said that the $533m from connected devices helped to offset "lower than expected demand" for business desktop PCs in the first quarter of 2015.

Total revenues were flat at $12.8bn in the three months ending in March, with net income up 3 per cent to $2bn and earnings per share 8 per cent higher than a year ago at 41 cents, all broadly in line with market expectations.

"These results reinforce the importance of continuing to execute our growth strategy," said Brian Krzanich, Intel's chief executive.

Intel's shares rallied by about 2 per cent in after-hours trading as it reaffirmed revenue guidance of around $13.2bn for the current quarter, meeting Wall Street forecasts. Its stock had fallen by 13 per cent so far this year after warning last month of a slow start to the year.

Alongside Intel, tech companies from Apple, Samsung and Google to IBM and Cisco are betting that the "internet of things" or IoT will become a meaningful market in the coming years. The "smart home" is expected to be a focus for Apple and Google at their forthcoming developer conferences in May and June, while IBM has said it will invest $3bn over the next four years in cloud services and software related to IoT.

IT research group Gartner has forecast that 4.9bn new objects will be connected to the internet this year, supporting $69.5bn of services spending this year and rising to $263bn by 2020.

While Intel's IoT revenues grew by 11 per cent over the same period a year ago, it was down 10 per cent compared with the fourth quarter. Revenues from data centres, a more established growth area, rose 19 per cent to $3.7bn.

After largely missing out on the smartphone boom of recent years, making the transition away from PCs is becoming more urgent for Intel after its desktop sales volumes fell by 16 per cent in the first quarter, compared with a year ago.

In another potential move at diversification, Intel discussed a merger with Altera, a maker of "programmable" processors, in what would have been its largest ever acquisition, it emerged last month. However, the talks reportedly fell apart over price.

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