LONDON – Investment broker Nomura Equity Research reckons the $1 billion that Intel shaved off its forecast for its 4Q11 sales revenue is about more than just a shortage of hard disk drives hurting PC sales and thereby Intel's sales of microprocessors.
Nomura has reduced its own estimate of Intel's 4Q11 sales by $800 million to the same figure as Intel; $13.7 billion. But it does not see the hard disk drive situation being as being the only reason that the reduction is requred.
In a note to clients entitled: Intel finally blows up and subtitled: Change in outlook may highlight issues beyond HDDs, Nomura said that problems at Intel are based on a wider set of challenges. "HDD shortages are a concern, but we think weak sell-through is also contributing to the $1 billion shortfall. We see softness in China, continued demand for ARM-based more power-efficient devices, and low volumes for ultrabooks," the note said.
In other words demand for PCs and ultrabooks is weak, but demand for ARM-based processors to go in smartphones and tablet computers is high. The ultrabook is Intel's favored form factor that it hopes will take market share from tablet computers just as tablet computers have taken market share from the notebook computer and killed the netbook at birth.
Nor does Nomura hold out much hope for Intel in the first half of 2012. "We would not be surprised to see below-seasonal growth in Q1 and Q2 given lack of PC catalysts (Windows 8 likely Q3 event), increasing ASP pressure, and slowing China and Europe," the report said.
As a result Nomura has cut its forecast for Intel sales revenue in 2012 by $3 billion to $53.4 billion, which would be a fall from its estimate for Intel's 2011 sales revenue of $53.8 billion.
Nothing exciting is happening in the laptop / desktop computer space. People are content to keep their old devices. The hot sales (and interest in buying the newest technology releases) are for SmartPhones and iPads. That doesn't help Intel.
I think the market will boil down to two camps. The home user is fine with a tablet and seldom needs more power since it is used for email, bill paying and just web browsing. Entertainment and movies are on the web enbabled TV. The other camp is the business user. They still need a good laptop and desktop with power for the applications needed in their business. Intel will shrink down to the business camp since the tablet space is ARM.
If PCs weren't soft right now, I doubt there would be much discussion about the demise of Intel dominance. As Nomura noted, China is slowing, Europe has been slowing, there is no PC catalyst like a new Windows release, and as masimons noted, no Ivy Bridge just yet.
Even without the HDD shortage, some lowering of sales guidance could've been expected.
A better question might be what will happen with ultrabooks? Will they take off and put a dent in tablet sales and/or traditional laptop sales, or will they bill stillborn like the netbook?
Intel also pumped up Ivy Bridge for the end of the year, then "oops" not til next quarter 2012. People were holding off for it; maybe making do with their smartphones. Wait too long, and people realize the phone might be enough.
Perhaps there is something more fundamental:
If your 'market' is not growing quickly, then Moore's Law is your enemy. Every two years, you or your competitors can deliver the same cpu cycles for half the cost. Unless the required CPUs cycles grows by 40-50% a year, your total market has to shrink. We are clearly there in the USA for PC demand. Pads, etc without Microsoft bloatware are not going to have such growth.
ARM processors + video accelerators will contain PC growth in the USA and may do so in the rest of the world. In the latter case, there will be a bunch of PC growth that never happens.
OTOH, this 'truth' has been 'obvious' for many years and Intel has beaten it up until now.
So, it is a definite maybe that Nomura, et al, are finally right. TWT
I am wondering if AMD is having an impact on Intel as well? I have not seen any numbers for AMD but I would be interested to see if AMD's numbers are up, down or holding constant? I agree that ARM is pushing forward and expect that unless Intel gets a low power/cost high performance chip family out they will miss the boat.
@phoenixdave: on your question, one would expect that to be the case but IDC forecasts for 2012 show a net reduction in server installs. I recently attended Andy Bechtelsheim's (Arista Networks) talk where he expects 60% of the servers sold in 2012 in datacenters and this is not good news for Intel. Faster communication speeds and virtualizations which make cloud computing pervasive and this is not good for Intel in the long run!