Intel's Latest Announcements Show It's Serious About Becoming a Post-PC company

When Intel (INTC)  announced four months ago it's laying off 12,000 workers, 11% of its workforce, the company declared the move is meant to "accelerate its evolution from a PC company to one that powers the cloud and billions of smart, connected computing devices."

The flurry of announcements made at this week's Intel Developer Forum (IDF), covering fields as far-flung as chip manufacturing, virtual reality, Internet of Things, drones and cloud solid-state drives, underscore how serious it is about pursuing this "evolution."

Arguably the most eye-catching announcement: Intel has obtained a license from long-time rival ARM Holdings (ARMH) , whose CPU cores and other intellectual property have been designed into many, many chips competing with Intel's offerings, that lets it manufacture ARM-powered chips designed by third parties.

LG, which has relied heavily on Qualcomm (QCOM)  for its mobile processor needs, will tap Intel to manufacture an internally-designed, ARM-based processor in 2017. The chip will leverage Intel's next-generation 10-nanometer manufacturing process.

Making nice with ARM was a prerequisite for Intel to grow its chip foundry business, which remains much smaller than that of market leaders Taiwan Semiconductor (TSM) , Globalfoundries and Samsung. Nonetheless, much like Microsoft's (MSFT) decision to launch Office iOS and Android apps, it represents a strategy change for a company that has often been wary of supporting rival platforms.

Eventually, the deal could allow Intel to sign up major ARM processor developers such as Qualcomm (QCOM) , Apple (AAPL) , Broadcom (BRCM) and MediaTek as clients; the fact Intel competes with some of these firms could still act as a roadblock. As one might guess, most big ARM chipmakers derive the lion's share of their revenue from products other than PCs.

Apple is a holding in Jim Cramer's Action Alerts PLUS Charitable Trust Portfolio. Want to be alerted before Cramer buys or sells AAPL? Learn more now.

Many of Intel's other notable IDF announcements also, in some form or another, shined a light on the company's transition efforts. They included:

  • Project Alloy, a platform for creating Intel-powered virtual reality headsets that (unlike most existing headsets) don't need to be paired with any other device, and also don't need external cameras, sensors or handheld controllers.
  • Aero, a reference platform for creating Intel-powered drones that run on a version of Linux and comes with software that lets users know where it's safe and legal to fly a drone. Intel is looking to take on drone processor leader Ambarella (AMBA) , as well as Qualcomm and Nvidia (NVDA) .
  • Euclid, a tiny device for hardware developers that combines Intel's RealSense depth-sensing/motion-tracking camera with an Atom processor and wireless connectivity. In a demo, attaching Euclid to a robot allowed it to begin seeing and sensing its surroundings.
  • Joule, a small computing board that contains a RealSense camera and allows many types of devices -- robots, drones VR and augmented-reality headsets, micro-servers and IoT devices are among the cited examples -- to see and collect data from the world around them.
  • A silicon photonics module for servers and other data center hardware that supports 100-gig transmission speeds, and is promised to be much cheaper than existing non-silicon solutions. Microsoft plans to use the module in its Azure cloud data centers. Optical transceiver makers Oclaro (OCLR)  and Applied Optoelectronics (AAOI) are trading lower following Intel's reveal.
  • Plans to give enterprises free remote access to servers featuring Intel's high-speed Optane SSDs, ahead of a full commercial launch of the products. Optane is based on 3D XPoint, a next-generation memory technology developed with Micron that (for a price) delivers much better performance and endurance than NAND flash memory, and (unlike DRAM) retains information when power is lost.

This isn't to say that Intel has paid no attention to PCs at IDF. The company showed off PC CPUs based on its next-gen Kaby Lake architecture (due this fall), which will deliver performance gains over comparable chips based on Intel's existing Skylake architecture, and integrate GPUs that can handling 4K-resolution gaming. But as the third architecture for its 14-nanometer process, Kaby Lake's very existence shows how Intel is paring back its PC investments. In the past, Intel only launched two PC CPU architectures per process before launching one on a new process.

The IDF announcements give some additional context for Intel's layoffs, which are hitting the company's PC and mobile divisions especially hard. They also mesh with CEO Brian Krzanich's subsequent revealing of a strategic vision in which the cloud, IoT, memory technologies, analytics and 5G were highlighted. And some of them may have been influenced by last fall's hiring of Qualcomm vet Murthy Renduchintala to run a massive new division encompassing many Intel units. Since his hiring, Renduchintala has been busy trying to shake up Intel's engineering culture, looking to speed the pace at which new products are launched and customer needs addressed.

As it is, Intel is much less dependent on PCs than it was a decade ago. Its Client Computing Group (CCG), which produces PC and mobile processors, accounted for just 54% of second-quarter revenue. The Data Center Group (DCG), which makes server CPUs and other data center chips, made up 30% of revenue and produced an operating profit that nearly matched CCG's. Much of the rest of Intel's sales came from embedded processors, flash memory and (thanks to the $16.7 billion Altera acquisition) programmable chips.

Thus to a large extent, Intel is already a post-PC company. Its IDF announcements do, however, show that the company wants to speed the pace of a transition that has been gradually unfolding.

More from Stocks

Tilray and Other Pot Stocks are Smokin' Hot Again

Tilray and Other Pot Stocks are Smokin' Hot Again

Dunkin' Donuts Drops 'Donuts' from Its Name (But Not Its Shelves)

Dunkin' Donuts Drops 'Donuts' from Its Name (But Not Its Shelves)

Bonds at Important Level as Market Awaits Fed Decision

Bonds at Important Level as Market Awaits Fed Decision

A Rally in This Sector Could Push the S&P 500 to 3,000

A Rally in This Sector Could Push the S&P 500 to 3,000

Striking Options: Fed, S&P 500, Crude Oil

Striking Options: Fed, S&P 500, Crude Oil