Intel’s new segments at a glance
While Intel (INTC) has focused on its computing and data center revenues, its IoT (Internet of things) revenue grew significantly in 1Q16. This year, the company adopted a strategy to maximize growth from its acquisitions in the following two ways:
- by integrating them into core processors
- by selling them as standalone products
The company also added a new revenue source of programmable chips with the acquisition of Altera. The growth of this segment remains to be seen in coming quarters.
The company has meanwhile created two new segments based on the above strategy: NSG (Non-Volatile Memory Solutions Group) and ISecG (Intel Security Group).
Non-Volatile Memory Solutions Group
NSG manufactures non-volatile flash memory 3D NAND. In fiscal 1Q16, the segment’s revenue fell 6% YoY to $557 million, and it reported an operating loss of $95 million, as compared to an operating profit of $72 million in fiscal 1Q15. These losses are due to the declining ASP (average selling price) of 3D NAND and the huge start-up cost of the Dalian facility in China (FXI). The facility will become operational in fiscal 2H16 and should enable Intel to compete with Samsung (SSNLF) in pricing.
Intel expects this segment to be the next big growth driver after IoT, due to its breakthrough memory technology 3D XPoint, which it has developed in collaboration with Micron Technology (MU). The two companies are currently sampling the technology with select customers and expect to launch it in 2018. SanDisk (SNDK) also claims to have developed a competing technology in collaboration with HP (HPQ) but has not clarified any progress on it so far.
Intel Security Group
The ISecG (Intel Security Group) includes security software products from McAfee, which it acquired in 2011 and later rebranded as Intel Security Solutions. The segment’s revenue grew by 12% YoY to $537 million, and its operating profit rose more than fourfold to $85 million.
New Technology Group
Having decided to report its efforts in niche technology such as drones and quantum computing, Intel has created NTG (new technology group). While no immediate growth is expected from this group, it may prove to be profitable in the long term. The group’s revenue fell from $76 million in fiscal 1Q15 to $50 million in fiscal 1Q16. Its operating loss widened from $669 million to $994 million during the same period.
In the next part, we’ll look at Intel’s guidance for fiscal 2Q16.