Intel Corporation (INTC) Should Quit Mobile: Robert Cyran

Intel Corporation (NASDAQ:INTC) should just quit trying to penetrate the mobile market, Robert Cyran of Reuters Breakingviews argues.

Central to Cyran’s argument is the fact that Intel Corporation (NASDAQ:INTC)’s business units have fared much better than its loss-making mobile division. For its fourth quarter performance report, the technology giant reported net profit of $3.7 billion, up 39%.

One of the biggest contributors to the company’s bottom line is its servers business, Cyran notes, while the its mobile division lost $4 billion for the whole 2014 financial year.

“It may be time to hang up on the effort,” Cyran writes, adding that “Broader use of its mobile wares will cut expenses by $800-million this year, Intel reckons. Much of the sum will come from reduced subsidies. That’s a start, but […] a better decision would be to stop its own efforts completely.”

According to Cyran, Intel Corporation (NASDAQ:INTC)’s challenge to ARM Holdings plc (ADR) (NASDAQ:ARMH) is increasingly becoming very pricey and impractical. The company, he noted, has moved to develop LTE chips as ARM still has a stranglehold on the mobile market.

In fact, ARM CEO Simon Segars recently said his company is ready to pounce of the server market and the blossoming Internet of Things, both fields Intel is very much involved in with the former bringing in a steady stream of growth. Meanwhile, Intel is spending a lot and consequently losing a lot to make some headway into the mobile market.

According to Cyran, Intel Corporation (NASDAQ:INTC) would benefit from realizing that it does not have much incentive to run its factories at their maximum capacity, something that they would be doing if they continue their assault on mobile.

He also said that this may be the ideal cost-cutting measure to do since it will be hard to reduce the $10 billion the company plans to spend on capex and research. Cyran added that Intel may just opt to sign more deals to manufacture chips for other business to utilize its idle factory capacities.

“Despite its well-known marketing slogan, Intel may need to accept that it doesn’t necessarily have to be inside,” Cyran concludes.

Ross Margolies’s Stelliam Investment Management owned about 5.09 million Intel Corporation (NASDAQ:INTC) shares by the end of September 2014.