Intel’s Q1 profit tumbles on weak PC market

Intel’s Q1 profit tumbles on weak PC market

Business news |
By eeNews Europe

Intel (Santa Clara, Calif.) reported first quarter revenue of USD12.6 billion, down 7 percent from the previous quarter and down 2 percent from the first quarter of 2012. The company reported a net income of USD2 billion, or 40 cents per share, down 17 percent from the previous quarter and down 25 percent from the first quarter of 2012.

Intel’s first quarter sales were in line with consensus analysts’ expectations.
In a conference call with analysts following the quarterly report, Intel executives said the company is pinning its hopes for the year largely to innovative new computing form factors, including the Intel specified Ultrabook, convertibles, tablets and touch- enabled notebooks. Executives acknowledged that the company’s revenue from silicon in smartphones is still negligible and that the company is still in the design win stage.

Paul Otellini, Intel’s longtime CEO who is retiring next month, praised the innovation taking place in the computing space, particularly among OEMs and Taiwanese ODMs. Otellini called the innovation currently taking place "as revolutionary as anything I’ve seen in my time in the industry."

Stacy Smith, Intel’s chief financial officer, said the company continues to make progress in smartphones in tablet. "First quarter tablet volume more than doubled from the fourth quarter and we expect it to double again in the second quarter," Smith said. In the second half of the year, Intel plans to launch Bay Trail, its next-generation Atom SoC, which will extend the company’s product line across tablet screen sizes and price points, Smith said.

Smith predicted that there would be Ultrabooks available during the 2013 holiday season that crossed below the USD600 price point, long viewed as an important milestone that could spur consumer adoption.

PC market crashes
According to a preliminary estimate by market research firm IHS, PC sales declined by the highest amount in at least 10 years in the first quarter. Mobile PC shipments declined 13.4 percent compared to the fourth quarter, IHS said. While sales typically decline in the first quarter following the peak season in the fourth quarter, the drop this year appears to be abnormally sharp, even exceeding the 10.3 percent plunge during first quarter of 2009, when the financial and economic crises were at their peak.
“The PC Industry is facing major challenges as it struggles to find a place in the consumer’s budget amid the rising popularity of the lower-priced media tablet,” said Craig Stice, senior principal analyst for computer platforms at IHS.

IHS expects PC market conditions to improve in the second half of 2013 as new mobile products drive market growth. Global shipments of ultrathin and Ultrabook PCs are expected to nearly triple in 2013, mostly driven by increased sales in the second half of the year.

For the second quarter, Intel said to expects sales of between USD12.4 billion and USD13.4 billion. For the full year 2013, Intel said it continues to expect revenue to increase by a low single-digit percentage compared to 2012 sales of USD53.3 billion. The company cut its 2013 capital spending estimate by about USD1 billion, saying it now expects to allocate between USD11.5 billion and USD12.5 billion to capital spending.
Despite the challenging PC market and the notion that PC sales may have peaked, Otellini said the future for Intel looks bright. "I am excited about what lies ahead for Intel," Otellini said. Intel’s CEO search "remains on track" with the goal of naming a successor when Otellini retires next month, a spokesman for the company said. Executives did not discuss the CEO search during the analyst call.

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