SAN FRANCISCO—Intel Corp. Tuesday reported declines in first quarter sales and profit amid challenging PC market conditions, but said it still expects to grow sales moderately in 2013. Intel also cut its capital spending forecast for the year by about $1 billion.
Intel (Santa Clara, Calif.) reported first quarter revenue of $12.6 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 $2 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 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 $600 price point, long viewed as an important milestone that could spur consumer adoption.
Intel's problems are a result of being largely tied to and identified with the PC market, and the PC market is withering.
I think the decline of the PC is largely inevitable, and don't really blame tablets. The market is saturated, and pretty much everyone who can use a PC likely has one. While there's a substantial market, it's for upgrades and replacements, not new sales. The financial markets like growth, and that market isn't growing.
I don't really see Ultrabooks becoming hugely successful. They fall into the upgrade and replacement category. If you buy an Ultrabook, you are probably replacing and existing laptop, notebook, or netbook with a faster and more powerful device.
I'm not counting Intel out. They have enormous resources and a huge technology portfolio. Their challenge is successfully competing in markets other than the PC, and their biggest current problem is addressing the perceived advantage in power efficiency held by ARM.
As we seem to be rapidly approaching the point where the microprocessor architecture no longer matters (except for maximum efficiency), maybe it's time for Intel to start over with a clean sheet approach to a new, non X86, non ARM, microprocessor. Maybe they could inlist Apple as a partner since Apple could use some hardware differentiation as well, to form the start of a new duoply for both personal computers and especially mobile devices.
I do not agree that the difference between gross margin and ASP is "semantics". As far as whether Intel will be able to compete successfully against ARM vendors: we shall see. Whatever you want to believe about Intel and its people they are not exactly dumb and see the same market shifts as you see. So far Intel managed to not only survive but thrive over market inflections, and they have been thorough many of them over the past decades. I certainly would not bet against Intel.
Revenue per wafer is directly related to ASP. I don't see how Intel could manage low margin based on their business model. Although Intel is one generation ahead, TSMC and Samsung are catching up fast. I think Intel is doomed. It's high expenditure fab will kill itself in long term.
I think lack of innovation is killing the PC. While hardware keeps incrementally improving, software to take advantage of this microproessor power is lagging. Software resources are being diverted to apps for smartphones and tablets.
I should have said gross margin instead of ASP, although we are kind of quibbling semantics here. Intel supports huge design, process development, test, marketing, and legal costs. There is NO WAY they can support these costs with the gross margin of an ARM vendor. Why is there such aggressive denial of the financial reality? I want Intel to survive, but I can see the way this story is headed.
David Patterson, known for his pioneering research that led to RAID, clusters and more, is part of a team at UC Berkeley that recently made its RISC-V processor architecture an open source hardware offering. We talk with Patterson and one of his colleagues behind the effort about the opportunities they see, what new kinds of designs they hope to enable and what it means for today’s commercial processor giants such as Intel, ARM and Imagination Technologies.