Why Intel continues to make money while PC sales nosedive

Intel insulates itself from falling chip sales by developing another business that’s proving a success

We normally think of Intel as the engine of the PC. But as it proved recently, the company can keep increasing revenue even as the PC market declines, plus if it does recover, its business is poised to take off.

Intel’s consumer processor division, the Client Computing Group (CCG), still makes up close to 60 percent of its business – $8.51 billion in total third-quarter revenue, compared to $4.1bn for its Data Center Group (DCG). But while the CCG’s profits fell by 20 percent that quarter, Intel still recorded flat revenue because profits at DCG, which include SSDs and Xeon chips, were up 9.3 percent.

IDC recently reported that PC shipments plunged 10.8 percent during the third quarter – heading into “terra incognito” or unknown territory, according to Crawford del Prete, its chief research officer. PC shipments in the third quarter fell 7.7 percent year over year to 73.7 million units, according to Gartner.

Intel, however, has been able to hold steady because of its healthy DCG numbers. “In a time period where PC units are down in high single digits... we still get enough growth from the data center and the memory business and the Internet of Company Things to pretty much tread water in terms of revenue growth,” Stacy Smith, Intel’s chief financial officer, said during a recent conference call.

Here’s the money quote: “If PC units are down in the mid-single digits, we actually grow at a pretty fast pace,” Smith said. “And if we get to where PC units are flat, we’re growing at a very fast pace.”

Intel, according to Smith, is “much less dependent on the PC segment than we historically have been”. Instead, the company’s growth comes from the datacentre, and Intel continues to invest in memory and the Internet of Things as an additional growth driver.