Intel Diversifies

According to a Gartner report, Worldwide PC Shipments in Fourth Quarter of 2012, global PC Shipments fell 5% last quarter to 90.3 million units. The increasing availability of lower cost tablet devices has eaten into PC sales. The launch of significant new operating systems such as Windows 8 is also not able to stir up demand. PC chip maker Intel (Nasdaq:INTC) is facing the heat.

Intel’s Financials

Intel’s Q4 revenues fell 3% over the year to $13.5 billion, marginally shy of market expectations of $13.52 billion. EPS of $0.48 was ahead of the market projections of $0.45.

By segment, PC revenues fell 6% over the year to $8.5 billion. The decline was driven by a 6% drop in volume of sales. During the quarter, the average selling prices remained flat over the year. Data Center Group’s revenues grew 4% over the year to $2.8 billion. Revenue from the other Intel Architecture segment fell 7% over the year to $1 billion.

The company ended the year with revenues of $53.3 billion and EPS of $2.13. By segment, PC Client Group revenues fell 3% to $34.3 billion, and the other Intel Architecture group fell 11% to $4.4 billion. Data Center Group grew 6% over the year to $10.7 billion.

For the current quarter, Intel projects revenues of $12.7 billion, short of the Street’s target of $12.9 billion. Intel expects to end the year with revenues of $53.8 billion-$54.4 billion, missing the Street’s target of $54.3 billion.

Intel’s Market Diversification

Intel is diversifying their product offerings to reduce reliance on the PC industry, which is suffering from decreasing sales. Recently, they announced their own version of Hadoop distribution to address the big data market. Intel Distribution for Apache Hadoop will include additional features from Intel that will improve the service’s performance and security. Analysts believe that the release will hurt other Hadoop distribution vendors, such as Cloudera, as Intel is better known these others and comes with a more extensive OEM and service provider partner network.

Mobile expansion has also been an area of focus for Intel. Recently, they announced the launch of dual-core Intel Atom processor-based platform aimed at the mobile device market. The new platform nearly doubles the computing performance of phones and enhances the graphics capabilities by three times, while maintaining battery life. The chip will also be available for Android-based tablets. Soon, they will also begin shipping phone chips with Long Term Evolution (LTE) technology that will enable faster downloads of media content. Intel’s chips are increasingly being used in smartphones that are developed for the emerging markets due to their cost effectiveness.

Intel also confirmed plans of to release their own TV service, which will be offered both through their set-top box and on mobile devices, including the iPad. The service will combine live TV and video-on-demand. Intel has kept the development secret and has not revealed details about the project. Analysts believe that the new box will come with features that will let viewers watch TV programs aired during the past week instead of having to worry about recording them or waiting for their reruns. They have not disclosed the content partners they are tying up with. The product is being tested by Intel’s employees and their families.

Besides product diversification, Intel also recently announced plans to make chips for Altera. As part of the agreement, Intel will share their manufacturing plants, or fabs, with other customers. Declining PC sales have hurt Intel and by sharing their plants, they will be able to better manage costs of technological development and ensure that their plants operate to capacity. Intel has a significant advantage over other chip makers because of the extensive investments made in their fabs. Altera will be able to benefit from Intel’s technological advantage through the tie-up.

In addition, Intel is also said to be evaluating plans to shut down manufacturing of motherboards for PCs by the end of this year. Instead, they will focus their efforts on development and manufacturing of these other new areas that they are venturing into.

Intel’s stock is trading at $21.14 with market capitalization of $104.56 billion. It touched a high of $29.27 in May 2012.