Smartphones and Tablets are continuously drawing significant number of users away from PCs. The prevalence of these devices has somehow affected shipments of traditional PCs and that’s why, Intel is now passing through the rough patches. A collaboration of Intel and Microsoft – Wintel – has played a vital role in creating high profit margins for the chip maker until the last year.
Intel’s Q3 2012 Earnings
Intel is still the world’s largest and highest valued chip maker, but its invincibility is expected to end in forthcoming years. Now, Intel’s Q3 2012 earnings report is globally available, which is considered as one of the dismal quarters for the chip maker. The corporation has reported revenue of $13.5 billion (GAAP) for Q3 2012 flat compare to the previous quarter. On the other hand, Intel succeeded to manage a net income of $3 billion in the last quarter, up 5.1% compare to the previous quarter of this year. In addition to these, operating income was $3.8 billion in the quarter, flat compared to Q2 2012.
It’s also true that Intel is struggling to make stronghold in the smartphone segment with less than 1% of the market share. At present, Intel is far behind in the race compare to Qualcomm, Samsung and ARM Holding Plc in terms of mobile chip market share.
Intel’s shares valuation has dropped about 7% over the past year, on the contrary, shares of Qualcomm—manufacturing logic chips or processor for Tablets–has gained 12% during the same period. Intel’s ‘server chip business’ (creating almost a quarter of revenue for the corporation) is mounting up due to increasing number of cloud data centers offered by Google and Amazon. According to a recent study, shipments of cloud servers are expected to surge at the average annual rate of 31% through 2015, which are quite faster than overall server shipments. Apparently, the division has opened an opportunity for the chip maker to generate more dollars as an additional server is required for every 600 new smartphone or 120 new Tablets that are bought by consumers.
The scenario is changing; users are now more willing to own Tablets rather than PCs. Intel responded little late to the trend that is now become one of the major threats for it. Intel has saddled hoard of cash on promotional activities of Ultrabook laptops with touch screen enabled by Microsoft Windows in last one year. Despite, the laptops have been lashed out for too expensiveness and that’s why, shipments of the devices are still lackluster.
However, the release of Intel’s new ‘Ivy Bridge processor’ was expected to speed up the sales of Ultrabooks devices, but it seems worthless this time. The devices with the premium features (including solid-state drives and touch screen displays) cost $1000 or more, which is much above of $600-$700 price tag.
Worldwide PC shipments dropped to 87.5 million units in the last quarter, down 8.3% from Q3 of 2011. Interestingly, the demand of the device also plummeted even in emerging markets, hats off to India and China endeavored to offset the shipments. Also, the wait for Windows 8 powered PCs in the last quarter also caused the damage.
Undoubtedly, poor shipments of PCs in the last quarter would not be considered as a good bode for Intel. At present, numbers of experiments are going on to cannibalize PCs by Tablets: It means $120 Intel CPUs are expected to be replaced by $25 ARM-based CPUs. Nevertheless, ultra-slim PCs are going to set-forth tremendous growth in the upcoming years–expecting to hit 65 million units by 2015. 10.3 million ‘Ultrabook’ PCs are estimated to be shipped this year and astoundingly, half of shipments will take place in next three months.