2016 is looking as though it'll be a decent -- but not great -- year for microprocessor giant Intel (NASDAQ: INTC). The company's stock price has lagged its peers in the semiconductor industry, and the company's revenue is expected to be up modestly from 2015 -- and that's including the revenue that Intel "bought" when it acquired programmable-logic vendor Altera.
Clearly, there's room for improvement in the company's overall business performance. Ahead of the new year, I'd like to put out three things that I'd like to see Intel achieve over the course of 2017.
Re-accelerate data center growth
Intel's growth strategy essentially relies on its Data Center Group (DCG) growing its revenue at a fast pace to offset a flat-to-down personal computer market. In late 2015, the company reiterated its goal to grow revenue in this business at a 15% compounded annual growth rate through 2019.
Although the company was optimistic about hitting that growth target heading into 2016, headwinds in the enterprise server market led the chipmaker to ultimately revise its full-year DCG growth guidance from 15% to "double-digit" growth and then, recently, to "high-single-digit" growth.
A swing and a miss, no question about it.
Intel's job in 2017, then, will be to not just grow its revenues in DCG, but to bring the growth rate back up. Perhaps 15% growth is too aggressive, but a return to the double-digit percentage revenue growth range would be nice.
Return memory business to profitability
Intel has been in the non-volatile memory (i.e., NAND flash) business for years, operating through a joint-venture with Micron (NASDAQ: MU). Late last year, Intel announced that it would be converting an old logic chip factory into a non-volatile memory factory, a project that would cost it about $1.5 billion in capital expenditures in 2016.
Through a combination of weaker-than-expected market for NAND flash and significant start-up costs associated with Intel's new memory factory, this business has been hemorrhaging money. Over the past three quarters, Intel's non-volatile memory business lost $453 million -- a dramatic drop compared with the $215 million profit that this business enjoyed during the first three quarters of 2015.
If Intel can just get this segment to breakeven during 2017, then that'd help to boost Intel's operating profits and thus operating margins by quite a bit. From there, as the business's performance improves and potentially generates profits, Intel will have opened a nice, though probably relatively modest, profit stream.
Keep its Client Computing Group stable
Intel's Client Computing Group, which largely consists of the sale of chips and other components into personal computers, has delivered quite nicely year to date, with revenue up a little over 1% in that time.
We'll see how the full year ends up, but the company did a good job of keeping revenue roughly flat while growing operating profits here by nearly 31%, because of both product margin improvements and operating expense reductions.
I don't expect a repeat of that excellent operating profit growth next year, but if the company can keep this business flat or, somehow, find a way to grow it, then that'd be a win as it'd allow the growth that Intel sees in its other businesses to more easily shine through.
Ashraf Eassa owns shares of Intel. 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.