Intel Corporation (NASDAQ:INTC) has, in the past quarter, failed to stir a bullish vibe among investors. Its earnings, released in January, paint a darker shade of gloom for the chip maker which has, for the past year, suffered amid shrinking PC sales. In an attempt to regain footing and boost investor confidence, Intel has decided to take a chance on the budget smartphone market.
Introducing the Yolo smartphone. Currently selling in Kenya, this smartphone has managed to create a unique selling point for itself. In addition to an affordable $125 price, the phone runs on the widely popular android operating system. From my point of view, this is a huge plus. Most consumers in budget markets are more familiar with the android operating system than they are with any other operating system. Yolo, which is an acronym for you live only once, is sold by Safaricom, the biggest carrier in the country with an estimated 65 percent market share. Given these dynamics, this smartphone is very likely to be a success in the market.
While pundits may be quick to argue that low budget devices yield high sales volumes but low margins, I am inclined to believe that this particular smartphone presents a lot of prospects for Intel. Although I do agree that it may not have any material impact on the company’s bottom line, I am of the strong opinion that it raises the platform to stage future initiatives in mobile.
For Intel to realize its true value and set growth in the right direction, it needs to find a formula that can cushion it from shrinking PC sales, while at the same time enhance its presence in the mobile market. The Yolo smartphone, despite being low-end, is a good start.
Mobile market is the most viable play
A lot of different insights have been given regarding Intel’s next move. From where I stand, I believe that the most viable play at the moment is the mobile market. Comparing Intel with its core competitors, it comes of note that its competitors have bigger footprints in mobile. This perhaps explains the sheer disparity in financial performance during the past quarter.
Going by earnings, ARM Holdings plc (NASDAQ:ARMH) managed to trounce Intel in an unforgiving fashion. Unlike Intel, which saw a 27 percent dip in Q4 earnings, ARM managed to grow its earnings for the quarter by 18 percent. Similarly, ARM’s top line increased 25 percent; an impressive achievement compared with Intel’s 3 percent revenue dip during the quarter. In fact, ARM’s profit and growth have exhibited double digit growth for three years straight.
What does ARM have that Intel does not? A commendable footing in mobile.