Intel sees weak 4Q, little Windows 8 bounce (Update)

Oct 16, 2012 by Peter Svensson

Intel Corp., the world's largest chipmaker, expects cold winds to blow this fall, as consumers shift their spending toward tablets and a weak global economy curbs corporate spending on computers.

When it reported third-quarter results Tuesday, Intel said the usual bounce in sales due to the holiday season is likely to be cut in half this year —even though Microsoft is launching a new operating system that it says will get consumers excited about PCs again.

In the quarter that just ended, Intel's revenue from PC chips fell 8 percent from a year ago, in line with reports from research firms IDC and Gartner that said worldwide PC sales fell more than 8 percent.

The shift away from PCs and toward tablets is a threat to Intel because most tablets don't use Intel processors. Instead, they use cheaper chips similar to the ones found in smartphones.

Intel wants to get its chips into tablets. The launch of Windows 8, Microsoft's new operating system, on Oct. 26 gives it a chance to do that, since the software is designed both for PCs and tablets.

But Intel's expectations for the Windows 8 launch are muted.

Normally, PC makers ramp up production for the holiday season, but Intel CEO Paul Otellini said he expects that increase to be halved this year, in part because manufacturers are cautious about how consumers will take to Windows 8.

The new software is a radical departure from previous Windows versions in terms of how people are expected to use it to control their PCs.

"I'm very excited about this new operating system," Otellini said, but "we haven't had a chance to really judge how consumers will embrace this in the PC space or not."

Patrick Moorhead with research firm Moor Insight said PC makers have been cautious about building up big stocks of new Windows 8 PCs. That means they put in fewer orders with Intel, though it did see a bit of a spike in September as PC makers built initial stock for this month's launch.

Intel's stock fell 77 cents, or 3.5 percent, to $21.58 in extended trading, after the release of the results. In regular trading, the shares rose 2.9 percent. The stock hit a 52-week low of $21.40 on Friday.

While the outlook for the fourth quarter was glum, Intel beat expectations for the third quarter, after it had lowered those expectations twice.

The Santa Clara, California, company said its third-quarter net income was $2.97 billion, or 58 cents per share, down from $3.47 billion, or 65 cents per share, a year ago.

Excluding the amortization of some acquisition-related assets and related tax effects, Intel earned 60 cents per share, handily beating the average estimate of analysts polled by FactSet, at 50 cents per share.

Revenue fell 5.5 percent to $13.5 billion. Analysts were expecting $13.22 billion, in line with the midpoint of Intel's own forecast.

Intel said it expects about $13.6 billion in fourth-quarter revenue, below the analyst forecast of $13.7 billion. More significantly, it said it expects a gross margin of 57 percent, well below the average for the last three years of 64 percent. The gross margin is Intel's revenue minus the cost of making and selling the chips, so the lower forecast points indirectly to lower profit in the fourth quarter. The reduction is due to lower utilization of its factories, and a shift toward to a new processor technology, which will idle some factories for retooling.

Explore further: IBM posts lower 1Q earnings amid hardware slump

5 /5 (1 vote)
add to favorites email to friend print save as pdf

Related Stories

CenturyLink 3Q net income falls as expenses rise

Nov 02, 2011

(AP) -- Phone company CenturyLink Inc. says its third-quarter net income fell as rising operating expenses related to its April acquisition of larger phone company Qwest overshadowed increased revenue.

TI 2Q revenue rises 42 pct as demand roars back

Jul 19, 2010

(AP) -- Texas Instruments Inc.' second-quarter income and revenue jumped as demand continued to recover after the recession. The company predicted even better results in the new quarter.

Qualcomm 3Q results beat Wall Street estimates

Jul 20, 2011

(AP) -- Wireless chip-maker Qualcomm Inc.'s results for the latest quarter beat Wall Street's expectations, and its projections for the current quarter are also above analysts' estimates.

Texas Instruments lowers 4Q outlook

Dec 09, 2011

(AP) -- Semiconductor maker Texas Instruments Inc. lowered its outlook for its fourth-quarter revenue and profit on Thursday, saying demand had weakened for a variety of products that use its chips.

Recommended for you

IBM posts lower 1Q earnings amid hardware slump

4 hours ago

IBM's first-quarter earnings fell and revenue came in below Wall Street's expectations amid an ongoing decline in its hardware business, one that was exasperated by weaker demand in China and emerging markets.

New US-Spanish firm says targets rich mobile ad market

11 hours ago

Spanish telecoms firm Telefonica and US investment giant Blackstone launched a mobile telephone advertising venture on Wednesday, challenging internet giants such as Google and Facebook in a multi-billion-dollar ...

Technip, Heerema win third giant Angolan oil contract

14 hours ago

The ultra-deep Angolan offshore oil project called Kaombo generated the third huge contract in three days on Wednesday when French group Total picked two firms to carry out underwater engineering worth $3.5 billion.

User comments : 2

Adjust slider to filter visible comments by rank

Display comments: newest first

Shifty0x88
not rated yet Oct 18, 2012
Intel needs to show tablet manufacturers that tablets can indeed be made with Intel chips, which probably means:

1) coming up with a chip that can compete with ARM chips that are in most smartphones and tablets, in terms of battery life and computational speed, and

2) releasing a basic tablet design like they did for the ultrabooks and release it to the manufacturers to modify and reproduce.

I believe Intel hoped that the Medfield Atom chips would do that, but I believe they need another more efficient chips to compete with ARM chips. Right now ARM chips have the battery life advantage, which is a big selling point of the tablet besides the OS and the speed and number of CPU cores.
VendicarD
not rated yet Oct 18, 2012
Intel has a battle plan.

Microsoft has Ball Boy Ballmer and his consecutive string of failures.

Windows 8 will save him. I'm sure of it.

More news stories

Microsoft CEO is driving data-culture mindset

(Phys.org) —Microsoft's future strategy: is all about leveraging data, from different sources, coming together using one cohesive Microsoft architecture. Microsoft CEO Satya Nadella on Tuesday, both in ...

Simplicity is key to co-operative robots

A way of making hundreds—or even thousands—of tiny robots cluster to carry out tasks without using any memory or processing power has been developed by engineers at the University of Sheffield, UK.

IBM posts lower 1Q earnings amid hardware slump

IBM's first-quarter earnings fell and revenue came in below Wall Street's expectations amid an ongoing decline in its hardware business, one that was exasperated by weaker demand in China and emerging markets.