Intel to merge mobile chip unit into PC group

Intel is going to merge its chipset unit targeting smartphones and tablets with it PC chip unit, arguing that the distinction is blurring between different computing models.

The reorganization was announced an internal memo by Intel CEO Brian Krzanich and will occur early next year. "The lines are blurring between PCs, tablets, phablets and phones," Intel spokesman Chuck Mulloy told Bloomberg. "The idea is to accelerate the implementation and create some efficiency so that we can move even faster."

According to the memo, Kirk Skaugen, who currently heads the PC-chips business, will lead the new combined unit called the client-computing group. Hermann Eul, currently in charge of the mobile communications group, will manage the transition until a new post for him is announced in the first quarter of 2015. The memo also said that operations in the mobile group that developed modem chipsets will shift to a wireless platform research and development organization.

Intel has argued that lines between PCs and mobile devices are falling away with the advent of will new two-in-one models that can operate as PCs and tablets. "That will happen more and more," Mulloy told the Wall Street Journal.

The two Intel units are in very different states of financial health. In the third quarter Intel's mobile group recorded revenue of just $1 million, compared to $353 million a year ago, and the group's operating loss was $1.04 billion in the quarter, down slightly from the year-ago quarter. The drop in revenue was due in large part to the subsidies Intel is paying tablet makers to include its silicon in their products.

On the other hand, the PC-chip unit posted an operating profit of $4.12 billion in the third quarter with sales that jumped 9 percent to $9.19 billion. By merging the two units, Intel will effectively be masking the financial health of the mobile group.

In October Krzanich said the company is on schedule to have the 3G version of its SoFIA chipset platform for entry-level smartphones out at the end of this year, and to have the LTE version in the market in the first half of 2015. Intel CFO Stacy Smith said that as SoFIA-based products ship, Intel's subsidy cost per unit will come down, which should improve Intel's mobile financials. Still, Smith conceded the mobile unit will likely report a loss in 2015.

Meanwhile, Intel partnered with fashion firm Opening Ceremony to launch the My Intelligent Communication Accessory, or Mica, smart bracelet. The gadget, which sports precious gems and snakeskin, will retail for $495, which includes two years of AT&T Mobility (NYSE: T) wireless data service provided by Intel. The Mica is aimed at women and can receive text messages, Google (NASDAQ: GOOG) and Facebook (NASDAQ: FB) notifications, and local business recommendations powered by Yelp and TomTom. Intel did not say what wireless technology the Mica has, but it will not rely on a smartphone for connectivity.

"We really approached this first and foremost about why would a woman want to wear this every day, and how can it be incorporated into her wardrobe," Humberto Leon, creative director at Opening Ceremony, told Re/code.

For more:
- see this WSJ article (sub. req.)
- see this Bloomberg article
- see this Intel release
- see this Re/code article

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Intel's James: We missed the iPhone's impact on the market
Intel's mobile biz loses $1.12B in Q2 despite uptick in tablet sales
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