A while back, microprocessor giant Intel (NASDAQ:INTC) had very large ambitions vis-a-vis the market for mobile devices. The company had invested significantly in the development of hardware platforms for Android-based smartphones and tablets, an investment that also required a significant investment in software to allow those platforms to work in harmony with the Alphabet (NASDAQ:GOOG) (NASDAQ:GOOGL) Android operating system.
Indeed, back in 2012, (now former) Intel executive Mike Bell told The Register that the company had "thousands of engineers right now optimizing Android to be the best version on Intel architecture."
Now, according to PC World, Intel is cutting back on its investment in the operating system.
This makes business sense
Thousands of highly trained software engineers cannot be cheap. If we assume that the company had around 2,000 software engineers working on Android, and if we suppose that these engineers on average cost the company approximately $150,000 per year (including salary, benefits, tools, and so on), then this effort must have been running Intel around $300 million per year.
Given that Intel has effectively exited the market for smartphone applications processors, and given that this exit likely means that Intel will be out of the market for applications processors that go into tablets (though an Intel spokesperson quoted claimed that the company will still be working with Google/Alphabet on tablet products), a continued significant investment in Android isn't one that will likely deliver good returns.
Instead, it can redeploy some of the engineers who were working on Android to other areas that could yield superior returns. I also don't doubt that the layoffs announced back in April will involve letting go of software engineers who previously worked on Android enablement for its platforms.
All in on Windows
Although Intel has cut back the development of chips targeted at smartphones and, by extension, Android tablets/phablets, the company is still developing platforms aimed at "tablet-like" 2-in-1 personal computers running Windows. Indeed, Intel has managed to bring down the power consumption of processors based on its flagship Core architecture to the point where these chips can be used in premium 2-in-1 devices that are quite thin and light.
The chip giant also continues to develop lower-cost platforms based on its lower-performance (and lower-power) Atom architecture. These should be suitable for both low-cost clamshell systems as well as 2-in-1 devices.
Going forward, Intel's goal will probably be to convince customers that 2-in-1 systems running the Windows operating system and powered by the company's processors are superior products than traditional Android or iOS-based tablets.
Can this strategy work?
At its investor meeting back in 2015, former Intel Client Computing Group chief Kirk Skaugen shared an interesting data point with respect to 2-in-1 PCs.
The data showed that around 40% of 2-in-1 PC buyers "had considered a tablet" as the key alternative to the 2-in-1 device. The implication here is that these 2-in-1 devices with Intel silicon inside are helping to regain lost share from conventional tablet computers.
Only time will tell whether such devices can continue to win back lost share out in time, but Intel will certainly try to keep that momentum going.
Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Ashraf Eassa owns shares of Intel. The Motley Fool owns shares of and recommends Alphabet (A shares) and Alphabet (C shares). The Motley Fool recommends Intel. 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.