Intel profit sinks 27% on dreadful PC sales

[dud]

I found this interesting. Even though Intel has a near monopoly on the PC CPU market (because of the lack of competitive products from AMD) the chipmaker is still having problems because overall PC sales are down:


http://money.cnn.com/2013/01/17/technology/enterprise/intel-earnings/



"The world's largest chipmaker reported a quarterly profit on Thursday that fell 27% from year-ago results, dragged down by slumping PC chip sales.

Intel sold 6% fewer PC chips in the fourth quarter -- its biggest business, and one that accounts for nearly two-thirds of its overall revenue.

The results weren't unexpected. Worldwide PC shipments fell by 5% in the fourth quarter and 3.5% for 2012, according to Gartner. It was the first time since the dot-com bust of 2001 that PC shipments fell from one year to the next."

 

[VirtualLarry]

Is anyone truely surprised? Desktop PCs are a dying breed.

Edit: I don't think that they will disappear completely, but there will be less sales, and the cost for components will rise.

 

[Exophase]

It's inevitable. Desktops would sell less even if everyone used them exactly the same amount, because they're not improving nearly as quickly as they used to. If you have no incentive to upgrade you won't upgrade as often, until you only buy new computers when your own one breaks and is out of warranty.

This will eventually happen to tablets too, once the technical improvements peak and the form factor decisions settle. At least with phones people are motivated to get a new one when their contract runs out.

 

[ShintaiDK]

Explanation is here:

The entire sector went backwards with 2.3%. Its not just Intel. For AMD, STMicroelectronics, TI, Toshiba, Renesas, Infinion, Freescale. Marvell, Hynix etc its an utter disaster.

Samsung, Qualcomm only did good due to canibalizing heavily in their own ranks. Without that ability they would have gone backwards too.

 

[SiliconWars]

Gross margin cratering. So this was just an AMD problem?

 

[SiliconWars]

Explanation is here:

The entire sector went backwards with 2.3%. Its not just Intel.

Why do I get the feeling you haven't linked that up till now while berating AMD as being the only tech to be losing out?

Cool your jets, Eyefinity
-ViRGE

 

[frozentundra123456]

Is anyone truely surprised? Desktop PCs are a dying breed.

Edit: I don't think that they will disappear completely, but there will be less sales, and the cost for components will rise.

The problem is that PCs are so powerful (relative to the uses of most consumers) that almost everyone who wants one has one already and has no real need to upgrade unless you are gaming, doing some other intensive task, or the machine just breaks.

Tablets OTOH, everyone who got an early one (if it is like mine anyway) probably says "this is a great formfactor but the performance really sucks. I want a better one." I am joking, but only sort of.

Also, would be nice to see the breakdown in sales by category. They must have lost a lot of the higher margin sales for a 5% decrease in sales to lead to a 27% decrease in revenue, unless they had some unusual expenses.

 

[ShintaiDK]

Why do I get the feeling you haven't linked that up till now while berating AMD as being the only tech to be losing out?

Its been linked over and over again. Go troll someone else.

 

[SiliconWars]

http://www.marketwatch.com/story/intel-cfo-says-margins-hit-by-aggressive-actions-2013-01-17

margins took a hit in the fourth quarter from "aggressive tactical actions" designed to reduce inventory levels.

So that would be the dumping of celerons and pentiums on the cheap? Maybe this is why AMD suffered previously, and now it's coming back to haunt intel? You can't put the losses off forever, "tactics" or not.

 

[ShintaiDK]

The problem is that PCs are so powerful (relative to the uses of most consumers) that almost everyone who wants one has one already and has no real need to upgrade unless you are gaming, doing some other intensive task, or the machine just breaks.

Tablets OTOH, everyone who got an early one (if it is like mine anyway) probably says "this is a great formfactor but the performance really sucks. I want a better one." I am joking, but only sort of.

Also, would be nice to see the breakdown in sales by category. They must have lost a lot of the higher margin sales for a 5% decrease in sales to lead to a 27% decrease in revenue, unless they had some unusual expenses.

Everything went backwards, not just PCs.

Its expected that the sector will rebound in 2013.

And its a -27% net income. Not revenue. Revenue was 13.5B$, down 3%. Gross margins was 58%.

 

[SiliconWars]

Go troll someone else.

Coming from you that's bloody hilarious.

 

[frozentundra123456]

Why do I get the feeling you haven't linked that up till now while berating AMD as being the only tech to be losing out?

This chart shows a LOT worse results for the entire year for AMD than Intel, for whatever that is worth. Also Intel has a lot more resources to weather a downturn than AMD. So I dont know if I were an AMD fan, as you obviously are, that I would take any satisfaction in this chart.

 

[SiliconWars]

I don't take any satisfaction from the chart, particularly as my living is made in PC's. I do however take great satisfaction in the knowledge that this isn't the "AMD problem" that most intel fans were telling us it was.

Intel gross margin down 8% YoY = Intel dumping chips to salvage their past 6 months - of course that's going to have a serious effect on AMD. What do you expect them to do? In the end it all makes sense - AMD had no option but to scale down because the PC market is imploding and not even Intel can save themselves from it.

 

[SiliconWars]

http://www.marketwatch.com/story/intel-cfo-says-margins-hit-by-aggressive-actions-2013-01-17

"was driven primarily by the aggressive tactical actions we took to reduce inventory levels and to redirect space and equipment to our 14nm process technology resulting in excess capacity charges."

LOL you couldn't make it up.

 

[Torn Mind]

The market for x86 products has transitioned to being a less significant subset of the "entire market of computing products".

 

[SiliconWars]

The market for x86 products has transitioned to being a less significant subset of the "entire market of computing products".

It's more like a complete and utter cratering. x86 is on the way out so fast that both intel and AMD are in a [load] of trouble.

No profanity in the technical forums, please
-ViRGE

 

[Exophase]

It's more like a complete and utter cratering. x86 is on the way out so fast that both intel and AMD are in a [load] of trouble.

x86 dependence might be loosening, but the market doesn't really have anything intrinsically against using x86 processors.

 

[SiliconWars]

x86 dependence might be loosening, but the market doesn't really have anything intrinsically against using x86 processors.

What about price or power draw or a combination of them both? What does x86 offer to the consumer now apart from the legacy, which is rapidly diminishing?

 

[grimpr]

I have a hunch that it will continue well into 2013 with Haswell. People are simply tired of all this since they have much more important things to consider financially because of the global economic downturn. Intel cant make them upgrade anymore.

 

[jpiniero]

If companies needed a good reason to slash their IT budget, Windows 8 is it. Obviously that affects Intel a good deal.

So that would be the dumping of celerons and pentiums on the cheap? Maybe this is why AMD suffered previously, and now it's coming back to haunt intel? You can't put the losses off forever, "tactics" or not.

Pretty clear Intel is forced to cannibalize AMD's share to keep revenue from falling more than it already has.

 

[georgec84]

Computing needs are oversaturated right now. It feels like we've hit something of a ceiling with respect to performance needs. A modest CPU with an integrated GPU is enough for most people to stream HD video, maybe dabble in light or casual gaming, and do other tasks.

Throw in tablets, smartphones, and other gizmos and you have people with more technology than they need.

 

[SiliconWars]

Pretty clear Intel is forced to cannibalize AMD's share to keep revenue from falling more than it already has.

Yep. Now with fabs sitting empty and the market disappearing at an alarming rate, you have got to question the wisdom behind their plan to spend $13 billion in 2013 on CAPEX.

Spend your way out of trouble? This is a pretty big gamble in the current climate. If 22nm fabs are sitting empty, why won't 14nm fabs?

http://www.marketwatch.com/story/intel-results-beat-street-but-outlook-weak-2013-01-17

Cody Acree of Williams Financial also echoed a similar sentiment that the suggestion Intel was betting on a big revenue lift in 2014 is “a big bet that I would gladly take the other side of."

Risky stuff indeed.

 

[SiliconWars]

Computing needs are oversaturated right now. It feels like we've hit something of a ceiling with respect to performance needs. A modest CPU with an integrated GPU is enough for most people to stream HD video, maybe dabble in light or casual gaming, and do other tasks.

Throw in tablets, smartphones, and other gizmos and you have people with more technology than they need.

You are correct, and on top of that people expect more for less money. This is intel's biggest problem - they made hay while the sun was shining but the moon has been waxing for a while, and now their entire lineup is probably looking at a drastic cut in pricing in order to remain competitive.

Building more fabs now is tantamount to suicide I feel, but intel has never really had any other plan except for being ahead in process. They don't know what else to do, so they are doing the only thing they have ever done by spending more and trying to buy themselves out of trouble.

 

[dma0991]

Microsoft has a role in this slump besides the fact that most mainstream consumers are content with the capabilities of a tablet. Had Windows 8 been made properly, the sales of PCs would've at least stayed the same.

 

[Exophase]

What about price or power draw or a combination of them both? What does x86 offer to the consumer now apart from the legacy, which is rapidly diminishing?

Being x86 doesn't give much of an intrinsic disadvantage for either in the markets you're specifying, not vs its competitors anyway.

I admitted that the dependence is loosening, but that doesn't mean that an x86 processor can't be successful in tablets and phones and various other platforms. Anyone who thinks otherwise must be in denial since existing hardware already contradicts this.