Intel (NASDAQ: INTC ) got a new CEO last May. Brian Krzanich is only the sixth CEO in Intel's 45-year history, as well as the third ex-COO in a row to take the chip giant's largest corner office.
Krzanich has more than seven months of CEO experience under his belt now, and 2014 will be the year when he's ready to fully implement his own strategy on top of predecessor Paul Otellini's vision. So, what will be different in 2014 -- and beyond?
When Krzanich opened up his first Intel investor day last month, he brought a new slogan to the party: "If it computes, it does it best with Intel."
As PC group chief Kirk Skaugen put it at another conference last week, the vision is to provide the best computing solution on every platform available. "It's going to be done best on IA, across every operating system and across every form factor, from the smallest Internet of things all the way to the highest end supercomputers in the world," he said.
Expect Intel to trumpet this new slogan from all corners in 2014. The company wants to be in everything, everywhere, all the time -- at least as long as you care about a premium computing experience.
Intel is already the unquestioned leader in main processors for PC systems and mid-tier servers. Advanced Micro Devices (NYSE: AMD ) is making a spirited play on the laptop market with its "accelerated processing units," or APUs. These chips add high-powered-graphics processing and the potential for other specialized improvements alongside the basic "central processing unit," or CPU, which has been powering computers since time immemorial. The APU philosophy could also give AMD a serious beachhead in the high-margin data-center market, where corporations gladly pay a premium to get the right solution for every server system.
But AMD's server ambitions are still just that -- ambitions without a bottom-line payoff. Intel will hardly sit still and allow AMD to run wild in Intel's most profitable market. If AMD's strength lies in producing custom chips for specialized workloads, then Intel isn't far behind.
At the investor event, Intel showed just how far it can go toward filling very specific needs. In 2013, eBay (NASDAQ: EBAY ) wanted a low-power processor to go with its proprietary cooling solutions, and Intel stepped up with a custom chip that raised peak performance by 50% without lifting the heat and power needs. Facebook (NASDAQ: FB ) wanted a custom chip for its picture-storage services, where you need high performance at the drop of a hat with long periods of low-power snoozing in between. So, Intel delivered not one but two custom chips to meet Facebook's very specific needs.
If Intel is both willing and able to deliver ultraspecific solutions for eBay and Facebook right now, I think it's safe to assume that you'll see a flood of custom processors coming out of Intel's factories in the next few years. Intel will do what it takes to keep its data-center business healthy, no matter what custom-tailored chips might be emanating from AMD's factories.
In the tablet and smartphone markets, Intel has a lot of work to do. The mobile sector is utterly dominated by platform builder ARM Holdings (NASDAQ: ARMH ) and its plethora of chip-designer partners.
Intel's push into mobile markets will take years, of course. Intel's finest mobile chips may crush ARM alternatives in raw performance, and they are catching up when it comes to battery life and performance per watt. But tablet and smartphone makers have been building devices around ARM chips for years, so there's a learning curve to deal with before switching to Intel -- even if Intel's products turn out to be better in every way.
So, I don't expect Intel to make significant mobile sales in 2014, because inertia is a tough road block to overcome. That doesn't stop Intel from working on its mobile products and reputation, and the company might surprise me -- and other Intel investors -- with a big-name-mobile contract in 2014. But next year looks like a transitional year for Intel's mobile strategy, where Krzanich gets to build the foundation for a solid long-term strategy.
Intel's long-term vision has crystallized and Krzanich will bring his considerable manufacturing expertise to bear on the entire process. He's very open to making revenue streams out of head-to-head rivals by manufacturing third-party chips on Intel's advanced processes.
Looking more specifically at 2014, Intel agrees with third-party analysts that PC unit sales are trending down next year. Enterprise PC systems are stabilizing while consumers keep turning toward tablet alternatives. The company hopes to win market share in the mobile sector over the next two years. Data center sales are on track for about 13% revenue growth in 2014.
All these moving parts should combine into revenue growth "well into the teens" in 2014, while operating margins are expanding. Both of these projections point to improvements over the current state of affairs:
In short, Intel investors like yours truly shouldn't expect huge gains in 2014. The company will be too busy building its long-term strategy to focus on short-term-investor gains. That sounds like an amazing time to get into the stock with a decades-long-investing horizon.
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