Intel (NASDAQ:INTC) has seen stagnant revenues and declining profits over the last couple of years. This hasn't been well-received by investors -- the stock is stuck in a pretty narrow range while the NASDAQ hits record highs. But it's important to understand just why the company has seen year-over-year earnings declines. It's really not as bad as one would initially think.

The mobile investment is huge
During fiscal year 2013, Intel is set to post an operating loss of about $2.5 billion in its Other IA division -- i.e. anything and everything mobile -- on about $4 billion in sales. Assuming that gross margins in this division are about 50%, this would imply that operating expenses are running hot at about $4.5 billion. This is a significant investment, and the company has yet to really see a meaningful return on that investment. But it's OK, and here's why.

Chips -- processors, modems, connectivity, and so on -- have a pretty long development cycle; developing a modern processor and surrounding CPU can take more than four years from initial concept to shipping silicon. So, the efforts that investors are seeing coming out today are really projects that started back in the 2009-2010 time frame, when Intel's budgets in the low-power space were relatively anemic.

The payoff is coming
The huge investment that Intel is making in mobile will begin to really pay off starting in 2014. From a financial perspective, Intel is actually going to see a wider operating loss in 2014 than it saw in 2013 --  think along the lines of a $3 billion loss. However, this loss will be used to enable Intel to use brute force to enter the tablet space. Indeed, the company announced that it is aiming to ship at least 40 million tablets, which translates into about 20% of the entire tablet market.

Unfortunately for the actual profitability aspect of the situation, Intel is going to be aggressively pushing a high-end tablet platform into mid-range and low-end devices. This means that Intel needs to provide subsidies to offset the increased bill of materials that these high-end chips require. However, by the time 2014 is out, Intel will have rolled out new platforms to remedy the bill-of-materials disadvantage.

Until then, look at how much money Intel's other businesses make
Intel's PC client group is on track to earn about $12 billion in operating profit in 2014. Its data center group is set to earn a little over $6 billion in operating profit and, although fairly negligible, its software and services group will also turn in a couple hundred million in operating profit, as will its NAND flash division. If one excludes the operating loss from Atom, this adds back about $0.38 per share to the bottom line.

This investment is necessary
The biggest growth markets in computing, and the market in which Intel's chip prowess can add meaningful value, is the mobile market. With PCs flat to down, Intel needs to find new avenues for growth -- smartphones and tablets are the obvious place to be. Qualcomm's (NASDAQ:QCOM) chip business, which includes smartphone chips, modems, cellular modems and transceivers, and connectivity combo chips, did nearly $17 billion in revenue in the most recent fiscal year. And that's while Qualcomm only has about 50% of the apps processor market and 62% of the cellular baseband market.

This tends to suggest that the opportunity here is north of $30 billion. While some of that demand is certainly captive -- in the case of the iPhone, for example -- it's tough to imagine that Intel couldn't drive some pretty attractive revenue growth as it takes share in this market, which, by the way, is growing. So, while the operating loss hurts today, once the product pipeline begins to roll out, it'll prove to have been more than worth it.

Foolish bottom line
Investing isn't just about looking at today's price-to-earnings ratios and competitive situations. Companies, especially tech companies, are investing in the future, and the most money is made by investing along with them. While Intel is viewed as a "dying stock" after three years of flat revenues, the inflection point is nearly here. Whether the sentiment around Intel changes in 2014 or early 2015, the important thing here is to keep an eye on the long-term picture. If Intel delivers on its 40 million tablet promise next year, it'll have plenty of credibility for any plans it reveals for 2015.

Ashraf Eassa owns shares of Intel. The Motley Fool recommends Intel. The Motley Fool owns shares of Intel and Qualcomm. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.