SUBSCRIBE TO TMCnet
TMCnet - World's Largest Communications and Technology Community

TMC NEWS

TMCNET eNEWSLETTER SIGNUP

Intel's profit and revenue slump amid PC sales slowdown
[April 17, 2013]

Intel's profit and revenue slump amid PC sales slowdown

SANTA CLARA, Apr 17, 2013 (San Jose Mercury News - McClatchy-Tribune Information Services via COMTEX) -- Struggling with the slumping personal computer market, Intel (INTC) on Tuesday reported first-quarter earnings that met Wall Street's expectations but its sales for the period were less than most experts had forecast.

The company said it earned $2 billion, or 40 cents a share, on sales of $12.6 billion. Sales were off nearly 3 percent from the same period a year ago and its profit was down about 25 percent, the latter drop due largely to what company officials said were production-related expenses that should boost its profit in future quarters.

Analysts surveyed by Thomson Reuters generally had expected those earnings but on sales of just under $13 billion.


Given the big decline in PC sales, tech analyst Patrick Moorhead said Intel's earnings and prediction that its sales should pick up later this year "was better than I expected." CEO Paul Otellini, who is retiring in May, also was upbeat during a conference call with analysts, declaring, "I'm excited about what lies ahead for Intel." But Edward Jones analyst Bill Kreher called Intel's sales projection for the year "optimistic," adding that he's concerned the company's "business model is at risk." Before announcing its earnings, Intel's stock price rose 54 cents -- or nearly 3 percent -- to close at $21.92. In after-hours trading, its shares fell about 0.1 percent.

The world's biggest chipmaker in terms of revenue, Intel is one of the Bay Area's most closely watched companies because its fortunes are widely regarded as a barometer of the overall tech sector's health. While other companies were dragged down by the recent recession, Intel reported quarter after quarter of robust earnings.

But the Santa Clara company lately has begun to falter and it suffered a big drop in profit in the fourth quarter of 2012. Its main problem is that it gets most of its revenue from providing chips for personal computers, which are increasingly being abandoned by consumers in favor of smartphones and tablets. PC sales fell 14 percent in the first three months of this year, the biggest drop in nearly two decades.

Because of that, Intel has been trying to get its chips into mobile devices. But those gadgets mostly use other company's chips, which employ a design from British firm ARM Holdings that traditionally has been more power-efficient and provided longer battery life than Intel's processors. In addition, the ARM chip suppliers are pushing to get their chips into notebooks as well as computer servers, another business Intel has long dominated.

All that spells trouble for the Santa Clara chip giant, Bernstein Research analyst Stacy Rasgon concluded in a recent note to his clients.

"Intel is in a battle of survival -- not only do they need to penetrate massively into the computing spaces currently dominated by the ARM camp, but they also need to keep the ARM camp from burrowing their way upward into the PC space," he said. "This will only get harder (and more confusing) as the lines between PCs and tablets further blur." However, Intel is expected to have a line of new chips by 2014 that many analysts believe could give the ARM variety stiff competition in mobile devices. Tech analyst Jack Gold recently predicted that Intel's power-efficient processors could capture 25 percent of that market, "as uses expand beyond smartphones and into more feature-rich tablets and other mobile devices," including automobiles.

Analysts at FBR Capital Markets also have reported that Intel's chips increasingly are being used in industrial, medical, automotive and television applications, adding that "Intel could continue to build this into a bigger business going forward." Intel's future has been clouded by questions over who will lead the company when Otellini retires. Moreover, the company has been greatly boosting its spending on new factories, planning $12 billion worth of such investments just this year. That worries some analysts, who fear the firm won't find enough buyers for the chips it makes.

But others suspect Intel has an ace up its sleeve: manufacturing chips for other companies.

Earlier this year, Altera announced that Intel would begin making its integrated circuits. And some analysts believe Cisco Systems (CSCO), Brocade and even Apple (AAPL) could strike similar deals with Intel. Such an arrangement with Apple alone could generate $3.6 billion in annual revenue for Intel by 2017, according to an assessment by J.P. Morgan.

Nathan Brookwood, of market consulting firm Insight 64, is among those who believe an Intel pact to make chips for Apple and other firms "ultimately will happen," as other companies "recognize that Intel has some pretty impressive manufacturing technology." Contact Steve Johnson at 408-920-5043. Follow him at Twitter.com/steveatmercnews.

___ (c)2013 San Jose Mercury News (San Jose, Calif.) Visit the San Jose Mercury News (San Jose, Calif.) at www.mercurynews.com Distributed by MCT Information Services

[ Back To TMCnet.com's Homepage ]





LATEST VIDEOS

DOWNLOAD CENTER

UPCOMING WEBINARS

MOST POPULAR STORIES





Technology Marketing Corporation

800 Connecticut Ave, 1st Floor East, Norwalk, CT 06854 USA
Ph: 800-243-6002, 203-852-6800
Fx: 203-866-3326

General comments: tmc@tmcnet.com.
Comments about this site: webmaster@tmcnet.com.

STAY CURRENT YOUR WAY

© 2014 Technology Marketing Corporation. All rights reserved | Privacy Policy