Intel: Chippin' away

If performance is about meeting expectations then Intel had a good quarter, hitting its revenue forecast bang-on at $12.8bn. But growing a successful company is about more than hitting quarterly revenue forecasts, and Intel's broader growth challenges remain as serious as ever. The quarterly growth target that was met so neatly had actually been lowered by $1bn earlier in the year, because of lower global demand for personal computers (most of which use Intel chips). Sales next quarter are expected to fall, compared with the year prior; Intel hopes its full-year revenues will be flat.

There are some bright spots. Intel has largely captured the global data centre market, and that business grew by a fifth, year on year. For the first time data centres have become Intel's most profitable segment, accounting for more than half of pre-tax operating income.

However, Intel lags behind in the fast-growing smartphone market, where its chips have struggled to catch on. Its mobile group has reported more than $9bn in cumulative operating losses since 2012. Those losses will be masked under Intel's new reporting structure, which lumps mobile and PC into a single new segment, making it conveniently impossible to parse out mobile revenues or losses. The word "mobile" barely appears in Intel's latest earnings release - hardly a vote of confidence. On top of that, Intel believes the global tablet market will shrink this year.

Intel has two options, then, for growth: organically, or by acquisition. Organic growth will be difficult because of the challenging PC market. Growing by acquisition would make sense with the right target, particularly one with an edge in smartphones. This would be expensive though: a potential deal with chipmaker Altera had a reported price tag of more than $10bn. In the short term, then, Intel must focus on keeping expectations in line with a challenging reality.

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