Intel pivot to IoT produces lackluster growth

Intel’s restructuring towards a focus on Internet of Things (IoT) and cloud-based businesses delivered disappointing growth this quarter.

As reported by Computer Weekly, the U.S. microchip behemoth posted profits that were down 51% this quarter compared to the same period last year.

The poor results were blamed on $1.4 billion in restructuring costs as Intel refocuses on businesses linked to IoT and cloud computing. This follows the announcement in the first quarter of 2016 to cut 12,000 employees, or 11% of its worldwide workforce, as part of the strategic reorientation.

Though growth figures were glum, Intel CEO Brian Krzanich noted that Q2 revenues matched the company’s outlook and profitability was better than forecast. Intel posted revenues of $13.5 billion, which is an increase of 3% from a year ago.

“Our restructuring initiative to accelerate Intel’s transformation is solidly on track,” said Krzanich. “We are gaining momentum heading into the second half.”

The restructuring is projected to produce $750 million in cash savings this year and $1.4 billion in annual savings beginning in 2017.

Intel also lagging on data centers

However, for this quarter Intel did not hit growth targets for microchip sales destined for data centers. These sales were meant to compensate for a slowing trend in sales of personal computers and their requisite components.

Revenues for data centers rose only 5% to $4 billion, which was less than half the growth of last year and less than analysts’ estimates of $4.16 billion. Meanwhile IoT revenues were $572 million, an increase of just 2% compared to the same period last year.

Nonetheless, Intel brass remained optimistic that the restructuring will produce the desired results sooner or later. “While we remain cautious on the PC market, we are forecasting growth in 2016 built on strength in data centers, the Internet of Things and programmable solutions,” said Krzanich.

Specifically, Intel is betting that corporate clients will buy its new datacenter chips which will be launched later this year. The microprocessors are based on Intel’s Broadwell micro-architecture and are aimed at the enterprise market.

This follows other moves by Intel to move further into such realms as autonomous vehicles and machine learning.

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