Intel continues to pare mobile losses, buys CDMA modem assets from VIA Telecom

Intel CEO Brian Krzanich said the company remains "solidly on track" to achieve its previously committed goal to cut around $800 million from losses in its mobile business this year and said more than 75 percent of that goal has already been realized so far. The chipset maker also confirmed it acquired the CDMA modem assets of VIA Telecom.

Overall for the third quarter Intel said its net income fell to $3.11 billion, or 64 cents per share, down from $3.32 billion, or 66 cents per share, in the year-ago period. The figures beat analysts' average expectation of a profit of 59 cents per share, according to Reuters. Intel posted net revenue of $14.47 billion, down from $14.55 billion a year ago, but beating analysts' estimate of $14.22 billion.

Krzanich indicated on the company's earnings conference call yesterday that Intel will likely improve its mobile profitability more than $800 million but declined to say by how much. "We are going to go into this business to make money and we have to get there," he said, according to a Seeking Alpha transcript. "That is absolutely the fundamental strategy."

Intel will maintain its market share in tablet chipsets, Krzanich said, but also will not get drawn into a price war, and is instead focused on adding value and innovation to tablet products. "So you're going to see some tablets as we go towards the holidays, with things like RealSense and that allow people new usages and new applications," he said. "And as we go into 2016, you will see more of that."

RealSense is Intel's 3D camera software, which can be used in devices and applications to do things like use gesture commands and your voice to scroll through a recipe app so you don't touch it while cooking or enable hologram-like experiences without the need for additional eyewear.

Intel needs to be more cautious in the smartphone market, he said, likely because of the dominant position of Qualcomm (NASDAQ:QCOM) and other competitors like MediaTek. "We will be even more careful there, doing partnerships with people, where we can go in, we can provide innovation and the right cost model, make some money for both us and our partners, and we have been very, very careful," he said. "And that's why, we have actually said our bigger, longer term strategy there is modems, to the general phone market, and then partnerships for specific products; and that's the Spectrum and Rockchip partnerships that we have right now."

While Intel's 7260 LTE modem has been shipping throughout this year, Krzanich noted that its next-generation 7360 modem chipset will be shipping by the end of this year, with products to be announced by Intel's customers next year. In the first half 2016, Krzanich added, Intel will see its "SoFIA" chipsets with LTE designed for low-cost smartphones, phablets and tablets in the market.

When asked about Marvell's apparent decision to exit the cellular baseband market, Krzanich said "it's a competitive market, and it's not as much about how many players are in it. There is actually I think more than two. But it's really about keeping that yearly cadence and having the right technologies in place and being competitive, and it doesn't really matter almost how many there are, there will be somebody there trying to compete with you at that leading edge."

Earlier this month VIA Technologies announced that VIA Telecom had completed the sale of part of its assets to Intel, but did not disclose the final details of the transaction. Intel spokeswoman Stephanie Matthew confirmed to FierceWireless that the company had purchased VIA's CDMA modem assets.

"We did acquire select VIA Telecom assets on Sept. 30," she said. "VIA Telecom will bring to Intel its CDMA technology, expertise in reference designs and complete platforms, as well as skillset to deliver low-cost entry platforms. This acquisition along with Intel's current low-cost mobile platform roadmap is expected to help Intel expand its ability to capture part of the China 6-mode CDMA mobile market."

"Finally, Intel realized that it cannot be a major player in the LTE modem market unless it also has a CDMA capability," Forward Concepts analyst Will Strauss said in in his Wireless/DSP newsletter. "CDMA is required for any smartphone on Verizon's huge network (and for China Telecom -- paired with LTE -- and some networks in Taiwan, Korea and elsewhere)."

Strauss noted that "that earlier lack of CDMA capability may be behind ASUSTeK's decision earlier this year to drop Intel's LTE modem for Qualcomm's. That certainly had to be a disappointment, since ASUSTeK is Intel's largest customer for PC motherboards and has also been its largest cellphone customer." 

For more:
- see this Intel release
- see this Seeking Alpha transcript
- see this NYT article 
- see this Re/code article
- see this Bloomberg article

Special Report:  Wireless in the third quarter of 2015

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