Intel Corp. (INTC) plans to merge its PC and mobile processor divisions, reflecting an altering market in which the line between tablets and laptops has blurred.
The New Structure
The chipmaker will form a new division called the Client Computing Group in early 2015. This division will comprise teams that fabricate its core processors for desktops and laptops and those that manufacture its Atom chips for smartphones and tablets.
The Mobile and Communications Group, as it is currently known, will be divided. The teams that fabricate mobile processors will join the new client group, whereas the rest who manufacture modems will be part of a new wireless R&D group.
Kirk Skaugen, who heads what's currently known as the PC Client Group, will lead the Client Computing Group. Herman Eul, who runs the mobile group currently, will get a new role to be announced after the end of the first quarter. Till that time, he will watch over the move to the new structure.
The implication for financial analysts, including how Intel will report sales for the new groups, is still being determined.
The Need for a Change
The formation of a new client unit can be attributed to the way consumers increasingly use devices. Currently, two-in-one and convertible systems can be used either as a conventional notebook or a tablet. Smartphone screens continue to get larger while those on tablets get smaller, giving rise to what are being termed as "phablets."
Intel spokesman Chuck Mulloy confirmed the reorganization and said that the changes will allow it to improve operational efficiency.
The restructuring comes as Intel counters competition from Arm Holdings, a U.K.-based company to improve its position in the market for smartphones and tablets, which is dominated by chips based on designs from Arm Holdings.
The Mobile and Communications Group reported an operating loss of around $1 billion in the last-reported quarter. One reason is that it has been making payments to tablet manufacturers to persuade them to use its chips. Intel intends to get its processors into 40 million new tablets this year.
Other Stocks to Consider
Intel currently has a Zacks Rank #2 (Buy). Investors can also consider Mercadolibre, Inc. (MELI), World Energy Solutions, Inc. (XWES) and Baidu Inc. (BIDU). While Mercadolibre sports a Zacks Rank #1 (Strong Buy), both Baidu and World Energy Solutions carry a Zacks Rank #2.
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