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Intel: Bloodied but Unbowed

First-quarter profits plunge 25% year-over-year to $2.05 billion

Despite what the Wall Street Journal says PCs have not quite reached “typewriter-level numbers.”

That being said Intel, which supplies the bulk of PC chips, still saw its first- quarter profits plunge 25% year-over-year to $2.05 billion, or 40 cents a share, down from $2.74 billion, or 53 cents a share, on revenues down 2.5% to $12.58 billion.

That wasn’t quiet as nasty as the 14% decline in worldwide PC shipments that IDC said last week happened in the last quarter. But it wasn’t as good as Intel’s own mid-range projections either.

IDC attributed the decline to PC cannibalization by tablets and smartphones that don’t use Intel chips.

Intel usually gets 85% of its profits from PC chips but its PC sales only fell 6% year-over-year to $8 billion.

What helped fluff up its results was a 7.5% year-over-year increase in server chip sales to $2.6 billion.

Intel is also trying to push its chips into mobile devices, which – alas – were down 9%. It’s gotten little mobile leverage compared to ARM.

The quarter will be the last reported by CEO Paul Otellini, who has decided to retire next month with no obvious heir.

“Amidst market softness, Intel performed well in the first quarter and I’m excited about what lies ahead for the company,” Otellini said Tuesday. “We shipped our next-generation PC microprocessors, introduced a new family of products for microservers and will ship our new tablet and smartphone microprocessors this quarter.”

Despite that fluffery, he also said, “We now compete wherever there is computing.”

Intel will transition to a tiny 14nm process this year.

The company was expected to return earnings of 41 cents a share in Q1, disappointing by only a penny, remarkable under the circumstances unless IDC’s prognostications are utterly exaggerated.

Intel’s Q1 gross margin fell from 64% to 56.2%. It operating expenses rose 2.1% to $4.55 billion.

For this quarter, Intel is forecasting revenues of $12.4 billion to $13.4 billion in line with consensus estimates of $12.85 billion with a gross margin of around 58%. It said it would also cut capital spending by a billion dollars to $12 billion.

Intel isn’t backing off its full-year estimates and continues to expect a revenue increase in the low single digits with a gross margin of round about 60%. It’s putting a good deal of stock in the coming Haswell chip.

More Stories By Maureen O'Gara

Maureen O'Gara the most read technology reporter for the past 20 years, is the Cloud Computing and Virtualization News Desk editor of SYS-CON Media. She is the publisher of famous "Billygrams" and the editor-in-chief of "Client/Server News" for more than a decade. One of the most respected technology reporters in the business, Maureen can be reached by email at maureen(at)sys-con.com or paperboy(at)g2news.com, and by phone at 516 759-7025. Twitter: @MaureenOGara

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