Intel’s quarterly earnings declined in Q1 thanks to sluggish PC sales, but the sky is not falling on the chip maker. The drop is simply a sign of the long-term transition toward mobile devices.
Intel Corp. posted $12.6 billion in revenue for the first quarter of 2013, down 7% from the prior quarter reflecting an average seasonal decline. The company reported its PC Client Group revenue of $8 billion, representing a 6.6% decrease compared with the previous fourth quarter and down 6% overall compared with the first quarter of 2012.
Intel’s PC sales were affected by the industry slump but the company painted a more optimistic picture for the second half of 2013. The company is looking forward to new mobile form factors coming to market from its OEMs and shipping by the holiday season. In fact, Intel expects to double its tablet volume in the second quarter of 2013.
Concern over whether slow traction for Windows 8 had been a major cause for the decrease in PC revenue caused Intel’s president and chief executive officer Paul Otellini to address the issue. Intel’s forthcoming core processor Haswell should help Windows 8 gain due to improvements in speed, battery life, new form factors and the integration of touch, he said.
However, as we all know, Microsoft’s tile interface has been a sore point among end users and the enterprise. Otellini acknowledged there was a learning curve for using Windows 8 and that price points for touch devices were still high, but will come down in the “next couple of quarters.”
PC market declines as mobile device market expands
The earnings call this week reiterated Intel’s continued commitment to mobile devices. Products such as Intel’s future version of its Atom processor dubbed Baytrail will enable OEMs to build new form factor devices supporting different screen sizes such as thinner, lighter and more power tablets and smart phones. Baytrail will ship in the second half of this year. (Will we see Windows-based mini-tablets soon?)
For Windows 8 that’s good news, especially if, as Intel noted, touch price points come down in the next few quarters. For example, Intel provides ultrabook specs which will enable OEMs to offer devices for $599 and perhaps as low as $499, Otellini said. He added that touch-enabled notebooks could drop down in price as low as $200.
Is Intel’s earnings decline dire?
I don’t think so.
We have to look at the bigger picture and long-range outlook of our changing technology landscape. We are in a transition mode. New form factor devices enable us to work in new and creative ways and these products already have been introduced or are coming.
The enterprise will buy devices – whether it’s a desktop PC, ultrabook, convertible notebook, tablet, smart phone or some other device that has yet to be invented – based on the user’s needs and what applications they require. Even a consumer will analyze their purchase too. Why buy a gaming desktop PC when what you really need is a tablet or ultrabook?
But these new devices have to work in conjunction with other technologies, like the cloud, and with your enterprise applications, for example.
The rate of technology introduction, growth and adoption occur at different rates. It’s a constantly changing puzzle and we have to figure out how the pieces fit at every stage. Even if we hit a quarterly slump today, in a few years that slump could be forgotten as we transition to new technology and new modes of computing. Remember when the industry sold more desktop PCs than notebooks and now it’s the opposite?
All of us need to remember that major technology transitions take time. We shouldn’t forget the quarterly outlook to keep companies on track, but more importantly, we need to take a step back and keep in mind what the future looks like.