Even though the technology giant; Apple is not known for granting favors, it surely did grant one to Intel by taking the modern-chip business off its hands.
The chip-manufacturing giant is still left with plenty of work to do, although this was not clearly evident in its strong 2nd quarter report on Thursday. Revenue for the quarter came in almost $1 billion above the firm’s forecast, mostly from an unexpected uptick in PC sales. Vital data-center business of Intel was also pleasantly surprised, although sales there were down 10 percent year-over-year as cloud-service operators cooled capital spending relative to a huge jump last year.
However, only a tiny portion of the quarter’s upside flowed through to full-year forecast of Intel. Citing uncertainty of China trade, Bob Swan, the Chief Executive of Intel stated that he was a little more cautious about the 2nd half of the year than he was three months back. Also, to ramp up its most recent 10-nanometer production technology, Intel is still scrambling in its costly effort. Arch-rival Taiwan Semiconductor Manufacturing Co is already in full production on the advanced process.
So, selling the unit to the technology giant is a smart move. It removes a money-losing business which was unlikely to stick around for the long term anyway considering Apple’s desire to design its own processors. Resources are also freed-up for more significant challenges. Intel stated that it expects as much as $500M in cost savings this year from the sale, but it also maintained its operating-margin target for the full year at 32 percent.
It should be preventing more delays. It was initially planned by firm to launch chips produced on its 10-nanometer process two years back. PC versions of those chips are anticipated to ship in volume later this year.