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.
Thinking the Intel model requires high-ASP is a flawed assumption. It is supported by high margins. This is where the process line-size lead that Intel has allows them to compete at lower ASPs, because their cost is significantly lower than their competition's.
When they announced the S-1200 microserver processor last fall, they went to great pains to emphasize that they actually make MORE money on a rack full of the smaller, lower-ASP chips.
The increasing popularity of tablets is clearly the dominant factor in the decline of PC sales, but I have to wonder if the release of Win8 didn't accelerate that decline.
Whether the Win8 critics are right or wrong or of old age or of a certain mindset doesn't change the fact that Win8 is not a big winner with desktop PC & notebook customers.
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.
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.
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 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.
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.