Intel‘s increased presence in networking is a bit of a mixed blessing. Networking “has a lower average selling price [ASP], but that average selling price is increasing,” CEO Brian Krzanich said on Intel’s fourth-quarter earnings call Thursday. “We expect the ASPs to continue to grow in that space as we add functionality.”
He was talking not about the switching components acquired from Fulcum Microsystems, but about CPUs sold into the networking market. They would count as part of Intel’s data center group, which recorded $16 billion in revenues for 2015, apart from Intel’s total revenues of $55 billion.
Intel’s data-center ASP fell by 1% in the fourth quarter compared with the previous year. Asked about that, Krzanich said Intel’s networking business tends to include a lot of small Atom processors, which are relatively cheap and would drive data-center ASP down as Intel’s networking business grows.
But Intel is also banking on a wave of network functions virtualization (NFV) to come. That should prod networking buyers into demanding higher CPU performance — meaning they’ll want chips that have more processor cores and are therefore more expensive.
PCs Are Still a Downer
Intel needs growth from areas such as networking, because the PC business has been in a stall, reflected by Wall Street’s disappointment in Intel’s forecast.
For the current quarter, Intel predicted $14.1 billion in non-GAAP revenues, missing Wall Street’s mark of $14.2 billion, according to Bloomberg. On today’s earnings call, Intel officials admitted they’re seeing a soft start to the year, and not just in PCs — sales to cloud providers have been off-target as well.
The forecast includes the Altera acquisition, which closed on Dec. 28, two days after Intel’s fourth quarter ended. Because Altera hasn’t reported fourth-quarter results, Intel officials were hesitant to predict the FPGA vendor’s first-quarter performance, but they did point out that Altera’s annual revenues of roughly $1.6 billion are probably too small to trigger major surprises in Intel’s $55 billion-a-year financials.
Intel’s stock was down 5 percent in after-hours trading. Intel reported fourth-quarter revenues of $14.9 billion and net income of $3.8 billion, or 74 cents per share. For the same quarter a year ago, Intel had reported revenues of $14.7 billion and net income of $3.7 billion, or 74 cents per share.
Revenues from the Internet of Things — which has long interested Intel but became a full-blown obsession this year — grew 7% year-over-year in 2015 to $2.3 billion, after being adjusted for currency fluctuations. Intel’s data center group saw an even bigger climb: up 11% from 2014 to $16 billion in revenues for 2015.