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Intel Is Said to Weigh Sale of Online Cable TV Venture

It is possible that Intel will forge ahead with OnCue through a partnership with Verizon, or a pact with some other company, but a purchase by Verizon is most likely, according to the people, who insisted on anonymity because the talks were supposed to be private. A deal will most likely be struck by the end of the year.

OnCue, as envisioned by Intel, would take the traditional cable television bundle and make it more consumer-friendly by transmitting it via the Internet. The company’s technology has impressed many, but channel owners have been reluctant to make the necessary licensing deals, stirring speculation that Intel might not move forward.

The other big roadblock has been an internal one. When a new chief executive, Brian M. Krzanich, took over the company earlier this year, he expressed skepticism about the television project because it was not a core part of Intel’s business, and directed the project leaders to seek partnerships for it.

Earlier this fall Intel executives privately acknowledged that they would fall short of their widely publicized goal of introducing OnCue to the public in time for the holiday season.

A takeover of OnCue could position Verizon to sell a cablelike television service across the United States through existing broadband pipes or through its Verizon Wireless business. Its current eight-year-old television subscription service, FiOS, has five million subscribers and is growing steadily, but it is available in only about 15 percent of American homes because it is delivered over a proprietary fiber-optic network. Verizon said last year that it did not plan to expand that fiber-optic network much more.

But a Verizon television service could potentially reach many more people if it were not linked to the fiber-optic network and were made available through any broadband connection. Alternatively, it could be sold as an optional mobile TV upgrade for the Verizon Wireless unit’s roughly 100 million monthly subscribers.

Verizon is in the process of gaining full ownership of the wireless unit, having announced last month a $130 billion acquisition of Vodafone’s 45 percent stake. “We don’t comment on speculation,” a Verizon spokeswoman said on Wednesday after the online technology site AllThingsD published an article on the talks with Intel. An Intel spokesman declined to comment.

Intel Reports Slight Drop in Earnings

Brian Krzanich, Intel’s chief executive, showed off prototypes last month that utilize the company's new line of chips aimed at wearable computers and sensors connected to the Internet.

SAN FRANCISCO — Intel reported earnings on Tuesday that were slightly lower than the same quarter a year ago, reflecting a drop in demand for personal computers.

Intel's stock performance over the last year.News from the technology industry, including start-ups, the Internet, enterprise and gadgets.
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The company, the world’s largest semiconductor maker, reported that net income in the third quarter was $2.95 billion, or 58 cents a share, just a bit below the year-ago quarter. Revenue was slightly higher, at $13.5 billion.

“We are executing on our strategy to offer an increasingly broad and diverse product portfolio,” Brian M. Krzanich, Intel’s chief executive, said in a statement accompanying the release. He called the quarter “modest growth in a tough environment.”

The net income was above the expectations of Wall Street analysts. They had expected 53 cents a share and revenue of $13.47 billion, according to a survey of analysts by Thomson Reuters.

Intel, based in Santa Clara, Calif., has long dominated the market for PCs and computer servers, but was slow to move into mobile devices like smartphones and tablets. Mr. Krzanich, who took over last spring, has said that he is taking steps to fix the problem, but that results will take time.

Intel Cuts 2013 Revenue Forecast as P.C. Industry Sags

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Stark Earnings for Intel Reflect Its Changing Market

For years, Intel executives scoffed at potential threats to its computer chip business from makers of less expensive chips for video games and mobile phones. The largest maker of chips, Intel continued to focus on putting those chips in personal computers, where they could be sold at a high profit margin.

That strategy appears to have run its course. The quality of mobile and gaming chips made by other companies has improved to a point where they run most of the world’s mobile phones and tablets. And partly because more people are turning to those mobile devices, PC sales are waning.

The move to mobile devices started to hurt Intel’s results in recent quarters, but the quarterly earnings that the company reported on Wednesday were particularly stark. Net income was $2 billion, or 39 cents a share, a drop of 29 percent from a year earlier. Revenue was $12.8 billion, down 5 percent.

Intel’s results were slightly below expectations. Analysts had predicted 40 cents a share and revenue of $12.9 billion, according to a survey of analysts by Thomson Reuters. Intel cut projections for annual revenue, gross margin and research and development.

“At the end of the day, the market will go where the market goes,” Brian M. Krzanich, Intel’s chief executive, said in a call to analysts after the earnings were released. “We’ve not always lived up to the standards we’ve set for ourselves.”

Mr. Krzanich, who took over in May, has previously said that Intel was slow to see the threat from tablets and smartphones. On Wednesday, he said that organizational changes, along with a renewed commitment to looking for “the next big thing,” would bring Intel back.

In the near term, this means going after the lower end of the PC and tablet market. A new chip will be out in time for the Christmas season, he said, in notebook-type computers that will be sold for as little as $300 and tablets costing $150. Intel also has plans to soon put new chips in higher-end touch-screen devices.

“He’s got to manage in a very tough environment,” said Douglas Freedman, analyst with RBC Capital Markets, referring to Mr. Krzanich. “Intel has done a good job showing they can make chips for mobile devices and tablets, but in the next three or four quarters he has to show he can bring that home.”

While chips for PCs still make up almost three-quarters of Intel’s revenue, few analysts expect the PC market to recover to its old highs. Last week, International Data Corporation said that PC sales fell 11.4 percent in the second quarter of the year. Most of the developed world is now saturated with the machines, and people are buying replacement computers at a slower rate.

Mr. Krzanich said Intel would “leave no computing opportunity untapped” to make up for the loss. In particular, he said, Intel’s “highest priority” would be small mobile devices.

Mr. Krzanich has also focused on cost-cutting and streamlining at the company, giving Mr. Freedman and others some hope that Intel’s profit will rebound.

In Wednesday’s call, the company noted that Microsoft’s Surface Pro tablet, which carries a high-margin Intel chip, was not counted in the PC sales numbers by I.D.C. and others. The analysis firm has said, however, that in the first quarter of this year Microsoft’s tablets, including tablets not carrying Intel chips, had just 4.4 percent of the tablet market, compared with 39 percent for Apple’s iPad. There is little to suggest significant improvement from there, an I.D.C. analyst said.

Bits Blog: After Fighting Mobile Trend, Intel Now Embraces It

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Bits Blog: Daily Report: Intel Aims to Remake the TV Landscape

Intel’s ambition to sell a bundle of television channels to subscribers over the Internet is running up against stiff resistance from cable and satellite companies, Brian Stelter reports in The New York Times.

The incumbent distributors are pressing owners of cable channels, with whom they have lucrative long-term contracts, not to sign contracts with upstarts like Intel.

But Intel’s executives intend to turn on its TV service by the end of the year. They are ready to pay more than existing distributors do for channels, though they have yet to announce any deals.

Prospective services like Intel TV, delivered over broadband services provided by the likes of Comcast and Time Warner Cable, have the potential to radically alter the media marketplace. Unlike Netflix, which sells a library of TV episodes and mainly supplements cable, a service like Intel’s — with dozens of channels, big and small, streaming through a modern interface — could cause more consumers to cancel their cable subscriptions.

And if Intel’s service ever goes on sale, industry executives predict that others will quickly follow.

Intel Names New Chief

The company also announced on Thursday that software honcho Renée James, 48, had been elevated to the post of president. Her appointment signaled to some that Intel, while likely intending to stick with its formula of intense investment to keep it ahead in the microchip technology game, is willing to explore new growth areas.

The company said last November that it might go external for its next CEO, raising hopes that it might find someone to shake it out of recent doldrums.

Seen as a frontrunner for the job since November, Krzanich inherits a company with margins of almost 60 percent that has all but extinguished rival Advanced Micro Devices Inc in the past few years, and is now the dominant maker of microprocessors for computers and servers.

But the company is in danger of finding itself sidelined as mobile devices such as tablets and ever more powerful smartphones accelerate a contraction of the personal computer market. The majority of gadgets today run processors based on rival ARM Holdings Plc's power-saving chip architecture.

"An external candidate might have been a better choice - with no negative reflection on Brian - simply because of the juncture Intel is at with what's happening in the PC market and the need to take major action outside of PCs," said Cody Acree, an analyst at Williams Financial Group.

"Brian may very well come in and make those same very difficult dramatic choices, but it's less likely."

He will take on the top job at the company's annual shareholder meeting on May 16, replacing Paul Otellini.

A relative unknown outside the tight-knit semiconductor industry, Krzanich has worked at Intel since 1982, rising to chief operating officer just over a year ago.

The 52-year-old has earned a reputation for being a decisive leader who liked to keep a low profile. Intel on Thursday stressed that he will have a strong partner in James, who in 2011 spearheaded Intel's $7.7 billion acquisition of No. 2 security software firm McAfee Inc.

She ran software product and service sales as well as a team of engineers focused on improving the performance of Microsoft Corp's Windows 8 and Google Inc's Android software when run on the company's microchips.

Her elevation "puts emphasis on the many businesses Intel is in beyond just chips. This is an important promotion, and it clearly signals the board wants to make Intel a much broader company," said Jack Gold, who runs research outfit Jack Gold Associates.

Intel shares closed 0.5 percent higher at $24.11 on the Nasdaq on Thursday.

CRUCIAL TIME

Intel's board took six months to deliberate on who could best helm a company with deep roots in Silicon Valley and computing history. The company today rakes in more than $50 billion in annual sales and runs manufacturing facilities across the globe.

Over the past few months, media reports have mentioned several possible external candidates including Sanjay Jha, former head of Motorola's mobile device division.

Intel Chairman Andy Bryant said Krzanich is capable of effecting a transformational move. But he also said Krzanich and James made for an "extremely powerful" partnership, and that the pair had co-developed a long-term strategic vision for the company that won the board over.

"They formed a partnership through the last few months that has blossomed into an extremely powerful pair," he said.

"You'll see a fairly dramatic change over a period of time," Bryant told Reuters in an interview. "If you look at Intel's past, with every CEO we've had that."

Intel Names Brian Krzanich as Chief Executive

The company that became a household name through its “Intel inside” stickers on personal computers is still the king of PC chips. But that is a shrinking business, and Intel is a laggard in making chips for hot products like smartphones and tablets.

That has put Intel in a bind, as semiconductor competitors long under the thumb of the Silicon Valley giant have gained traction through relationships with mobile device leaders like Apple and Samsung.

But Mr. Krzanich (pronounced KREZ-nick), a 52-year-old company veteran who started with Intel as an engineer when he was 22, says he is cleareyed about the challenges and has a plan to stop his company’s slide.

“I look at this world and see all kinds of devices connected to computers, and people connected to it all the time,” Mr. Krzanich said in an interview. “We can bring things to companies that others haven’t dreamed of.”

He even has a broader picture of Intel’s future, like imagining moving beyond today’s popular mobile devices and into other gadgets in people’s homes and even into so-called wearable computing devices. “If you’re just talking phones, you’re shooting behind the duck,” he added.

Last year, almost two-thirds of Intel’s $53 billion in revenue came from making chips for PCs, a market Mr. Krzanich acknowledges is “not growing, let’s be honest.”

Last month, researchers at the information technology firm IDC said PC demand declined more than 13 percent annually in the first quarter, as buyers turned to mobile devices like smartphones and tablets. In the same period, IDC said worldwide tablet shipments were up 142.4 percent, while smartphone shipments were up 41.6 percent. The bulk of Intel’s remaining revenue came from chips for computer servers, a business Intel still dominates.

Mr. Krzanich, who is the company’s chief operating officer and is an expert in running big chip factories, will become Intel’s sixth chief executive on May 16, succeeding Paul S. Otellini, who unexpectedly announced his retirement last November. Intel also promoted Renee James, the 48-year-old chief of the company’s software division, to president on Thursday.

Some analysts saw the appointment of Mr. Krzanich as a signal that the company would increase investment in its manufacturing while chasing new customers with chips meant for mobile products.

“The PC and server markets are so big, so important, that you can’t take your eye off the ball,” said Doug Freedman, an analyst with RBC Capital Markets. Mr. Krzanich, he noted, “is very much about the results. He comes from a world of schedules and manufacturing.”

But Mr. Freedman also said, “There’s a part of the investment community that would have preferred an outsider” to shake up the company. This was never likely at Intel, he noted, where employment shorter than a decade marks one as a newcomer. Intel said it considered both inside and outside candidates.

Mr. Krzanich was one of several internal candidates who made their final pitches to Intel’s board last weekend. Ms. James was also vying for the job, and Mr. Krzanich said the two had privately discussed working together, no matter who became chief executive.

“She was a very viable candidate,” he said. “Our vision of a mobile, connected computing environment was so close, we saw together we could drive things faster.”

Though he would not detail his entire strategy in the interview, Mr. Krzanich said he saw no reason to reduce Intel’s spending on cutting-edge chip technology and manufacturing. “I fought for this job for a reason,” he said. “The assets that made us great in PCs and servers are even stronger in the mobile and cloud world.”

In part, Mr. Krzanich says he believes he is carrying through on a plan that’s already under way.

On Monday, for example, Intel will introduce a new version of its low-power Atom chip designed for communications products, where its market is negligible.

If successful, Mr. Krzanich will create an Intel markedly different from the past.

Under Andrew S. Grove, the executive who coined the unofficial company slogan, “Only the paranoid survive” and led Intel to dominance in providing chips for PCs and servers, the company honed a business known for a few close relationships with partners like Microsoft, and then PC manufacturers like Hewlett-Packard and Dell. Those relationships and the fortunes of those companies have declined in recent years.

Today, Intel faces competition from Qualcomm and Nvidia in the manufacturing of chips for mobile devices. H.P. is showing off servers that use parts from five or more competitors.

Even Microsoft, once the other half of a relationship so close that pundits called the two companies Wintel, is working with other chip makers for its video game consoles and tablets.

This article has been revised to reflect the following correction:

Correction: May 4, 2013

An article on Friday about the challenges facing Intel’s new chief executive, Brian M. Krzanick, misspelled the surname of the company’s departing chief executive. He is Paul S. Otellini, not Ottellni.

Intel 4th-Quarter Earnings Are Sharply Lower

The world’s biggest maker of semiconductors, which grew by supplying chips to most of the world’s personal computer makers, is now facing an erosion of that market. According to Gartner, a market analysis firm, PC shipments worldwide declined 3.5 percent in 2012.

The result was evident Thursday in Intel’s fourth-quarter earnings report. The company, which is based in Santa Clara, Calif., reported net income of $2.5 billion, or 48 cents a share, down 27 percent from $3.4 billion, or 64 cents a share, a year earlier. Revenue fell 3 percent to $13.5 billion from $13.9 billion.

“The PC business as we’ve known it is evolving,” said Paul S. Otellini, Intel’s chief executive, in a call to analysts. “The form factors are going to blur here.”

Instead of PCs, more people and businesses are buying smartphones and tablets. Intel gets 64 percent of its revenues and some of its highest profit margins from chips for PCs. It has scrambled to revive the market, while it aggressively tries to supply tablet and smartphone makers, so far with little success.

But even as it gets harder to sell PCs, Intel appears to have managed its business better than many investors thought possible. Revenue was in line with analysts’ expectations, according to a survey by Thomson Reuters, but net income was higher than the 45 cents a share that the analysts were expecting, on average.

Intel projected lower revenue and pressure on its profit margins for 2013, however, which sent its shares down about 5 percent in after-hours trading. Intel shares finished regular trading at $22.68, up 57 cents.

At the after-hours price, Intel’s market capitalization dropped below that of Qualcomm — a smaller maker of chips, but a company that makes chips for smartphones and tablets. Even a year ago, this would have been unthinkable.

Over the last six months, shares of Intel have fallen about 18 percent, while Qualcomm’s stock is up almost 20 percent. ARM Holdings, which sells designs for low-power chips popular in mobile devices, is up almost 90 percent in that time.

“Longer term, Intel will move more aggressively into smartphones,” said Bobby Burleson, an analyst with Canaccord Genuity. “But everyone worries about their long-term gross margins.”

Intel, which employs an engineering-focused staff of 105,000 people, plans to continue to invest heavily in research and development, as well as new manufacturing facilities. Intel operates on the principle that making the biggest volumes of the most advanced chips gives it a quality and profit margin advantage.

Despite the lower earnings, Intel said it would spend $18.9 billion on research and development, along with marketing and administrative costs, in 2013. Two years ago Intel spent $16 billion on those things, increasing that amount to $18.2 billion last year.

“Our manufacturing leadership becomes increasingly valuable,” said Stacy J. Smith, Intel’s chief financial officer. “People expect Intel to make more powerful, more efficient devices. That applies across all our businesses.”

That works, as long as the chips have buyers. Last year Intel hoped two PC industry initiatives would woo buyers back to PCs, but neither did. One, backed by a large investment from Intel, was in lightweight ultrabook laptop computers, many of which had tablet features, like touch screens. These came to market later than analysts had expected, at prices most consumers did not find attractive.

The other, Microsoft’s release of its Windows 8 operating system, has so far failed to excite buyers. Consumers and businesses did not buy new computers in order to use the upgraded system.

Mr. Otellini remained upbeat about ultrabooks, saying that there were now 140 types of the lightweight laptops on the market. The number of styles and different ways they use things like keyboards and touch screens, he said, would make it harder to tell a PC from a tablet.

“We’re in the midst of a radical transformation with the blurring of form factors,” he said, adding that this year Intel would introduce a new chip, called Haswell, which would help in the production of lightweight machines that have longer battery life. He said little about Windows 8.

Intel’s second-largest business, chips for computer servers in data centers, reflected an overall strength in that industry. Fourth-quarter sales to data centers was $2.8 billion, an increase of 4 percent from a year earlier.

Intel Reports Third-Quarter Revenue of $13.5 Billion

Intel, the world’s biggest maker of chips, is feeling pain from a global downturn in demand for personal computers. While Intel makes many kinds of chips, the ones that go into PCs are among its most profitable. The PC market is eroding, however, because of economic weakness and a shift to devices like smartphones and tablets.

Intel has fought the trend by investing in new styles of PCs that work more like tablets, by selling chips for the servers in big cloud computing data centers that connect PCs and the new devices, and by finding new uses for more powerful chips. So far, little of this has worked.

“The problem is demand,” said Ken Dulaney, vice president at Gartner, a technology research firm. “People are buying other things with their disposable income for electronics, like tablets, televisions, smartphones, e-readers and gaming devices. Intel is trying to take its technology to these consumers, but this is a transition period.”

Almost no one is counting Intel out, but the rough market transition will not end soon. In a conference call with securities analysts, Paul Otellini, Intel’s chief executive, said that he expected PC demand would grow at half the normal rate in the fourth quarter.

At the same time, he expressed optimism about demand because of a new computer operating system from Microsoft called Windows 8 that will be released Oct. 26. Over 100 new, lighter types of PCs with tabletlike functions would be produced by computer manufacturers using Windows 8, Mr. Otellini said. That could renew demand in 2013.

“It’s pretty hard to say that in good economic cycles we wouldn’t get into normal growth,” Mr. Otellini said. “The tablet is not the end state of computing.”

The chip maker, based in Santa Clara, Calif., said net income in the third quarter fell 14.3 percent to $3 billion, or 58 cents a share, from $3.5 billion, or 65 cents a share, a year earlier. Revenue was $13.5 billion, down 5 percent from $14.2 billion a year earlier.

On Sept. 7, Intel warned that third-quarter revenue would be $13.2 billion after earlier projections of $13.8 billion to $14.8 billion. Industry analysts were expecting earnings of 50 cents a share, according to a survey by Thomson Reuters. The stock, which fell about 3.5 percent in after-hours trading, closed in regular trading up 62 cents, or 2.85 percent, at $22.35.

For the fourth quarter, Intel projected its revenue would be $13.6 billion, plus or minus $500 million, and that its gross profit margins would shrink.

Last week the International Data Corporation, a market research firm, estimated that the worldwide PC market contracted 8.6 percent in the third quarter. The smartphone and tablet manufacturers that Intel sells to tend to have more competition and lower volumes than those in the PC market, which is about 350 million units a year.

Intel has tried to revive the PC market with a small, thin design called the ultrabook, but so far this has been unsuccessful. Recently IHS iSuppli, a market research firm, forecast that just 28 million ultrabooks would be sold in the second half of 2012, down from an earlier estimate of 35 million units.

The pain was being felt by other chip makers, too. Last week AMD said its third-quarter revenue would fall about 10 percent from the $1.4 billion recorded in the second quarter. AMD was expected to lay off a significant number of its staff. Mr. Otellini did not indicate that Intel would be laying people off.

Away from PCs, which accounted for $8.6 billion of total revenue, Intel reported revenue of $2.7 billion in its data center group, an increase of 6 percent from a year ago.

DealBook: Intel to Buy Stake in Dutch Semiconductor Equipment Firm

Intel agreed Monday to buy a 15 percent stake in ASML Holding, a Dutch semiconductor equipment maker, in an investment that may total as much as $4.1 billion.

Under the terms of the deal, Intel will buy an initial 10 percent of ASML’s shares for about $2.1 billion. The American technology giant also agreed to pay about $1 billion to help finance additional research and development costs at ASML.

The investment will be used primarily to speed up the introduction of bigger chip wafers and newer semiconductor manufacturing technology known as extreme ultraviolet lithography.

If approved by ASML shareholders, Intel would later buy an additional 5 percent for $1 billion.

ASML, which is based in Veldhoven in the Netherlands, had previously said that it planned to sell up to 25 percent of itself to chip makers like Intel as a way to raise capital.

Intel said that it plans to pay for the investment through cash held in foreign subsidiaries, which it can use without incurring taxes in the United States.