Intel Profits Plummet 25%, Company Remains Committed To New Fab Ramps, 10nm Node

It's been obvious for weeks that Intel's earnings call this afternoon wasn't going to have much good news in it. With total PC shipments falling 13% quarter-on-quarter -- the worst decline in nearly 20 years -- there was no way Intel would escape being hit by that drop. Today, Santa Clara reported that its Q1 profits fell 25%, to $2B, down from $2.7B in the first quarter of 2012. Gross margins took a hammering, as well, falling to 56.2% from 64% in Q1 2012.

Despite these problems, Otellini was upbeat. "“Amidst market softness, Intel performed well in the first quarter and I’m excited about what lies ahead for the company,” said Paul Otellini, Intel president and CEO. “We shipped our next generation PC microprocessors, introduced a new family of products for micro-servers and will ship our new tablet and smartphone microprocessors this quarter. We are working with our customers to introduce innovative new products across multiple operating systems. The transition to 14nm technology this year will significantly increase the value provided by Intel architecture and process technology for our customers and in the marketplace."



That's an easy stance to take, however, when you're headed out the door. We're not implying that Otellini is blind to the challenges of the market, but it's his successor that'll have to solve this problem. For Intel, all the almost all the revenue news last quarter was bad. The Data Center Group did buck the trend slightly, posting a 7.5 percent year-on-year revenue improvement.

Still, Intel made $2B in profit last quarter. That's more cash than AMD earns in a quarter, period. The uglier question is whether or not the PC slide can be reversed, and whether AMD can weather the crisis if its own earnings took the same hit Intel's did. Santa Clara is insisting that its fiscal year forecast for 2013 doesn't need to change, which implies the manufacturer believes demand will jump sharply in later quarters thanks to Haswell uptake and sales of new x86 tablets with 22nm Atom processors inside of them. Intel has also remained committed to cap ex spending to bring new fabs online, though that's a standard tactic for the company. Intel has a habit of spending cash on R&D during downturns, so we're not surprised to see that continue.

That's going to need to be a heck of a recovery. Unfortunately for everyone, we've arrived at a point where it's not clear what the right moves are for Microsoft or Intel. AMD has the right idea (build better tablet parts), but x86 tablets simply aren't lighting up the universe. So where does the traditional x86 vendors go from here? For now, they're talking up 28nm / 22nm products. If new chips and Windows Blue both arrive, and the hemorrhaging doesn't change, the situation will get ugly -- fast. Haswell will launch in Q2, with 22nm Atom chips debuting by the end of the year.
Via:  Intel
Comments
thunderdan602 one year ago

In this economy, I'm not surprised. Also that wonderful OS that is Windows 8.

CDeeter one year ago

Yeah Joel, Intel's report has some serious negative overtones for AMD I think. God I hope AMD can hold on. I think they are really close to turning it around with there APUs.

Clixxer one year ago

I think AMD will be fine. While their CPUs may be lighting up the world they have their GPU market that last I saw was doing fine. Only thing I could see happening is if ARM tries to buy AMD or vice versa which was rumored last year.

Johnny3D one year ago

I think Intel will be alright. I know that if I could, I would buy an Intel processor today. I can't say the same thing about AMD. They don't have anything on the market that I would want to buy at the moment. I don't have faith in their processors compared to Intel's processors and their video cards continue to take a backseat to Nvidia cards.

Essentially, I don't see AMD ever being anything more than a runner up.

dpstyner one year ago

As the demand for tablet rises,  demand for PC seems to decrease at faster rate. Nevertheless, the demand for PC still exists for businesses uses. It is unlikely that PC market will completely collapse, but it's still possible that AMD will go bankrupt. 

  • If this trend continues, businesses in PC industry will continue to suffer. 
  • The audience interest (consumer interest) is relatively low in the PC market. Unless they come out with some innovative technology, it is unlikely they will gain any attention.
  • The declining trend in sales implies that market is shrinking due to demand shift. If AMD goes bankrupt, Intel will most likely take a monopolistic position in the industry.
  • It is highly unlikely that they will move into cellphone / tablet market, as the other companies (Samsung, Apple)  have competitive advantage
  • Recession coming in near future due to Euro Crisis certainly will have a huge impact. The impact will even be larger than the ones for global economic recession in 2008.
  • PC market will suffer.... no matter what happens. It's going to be hard for Intel to survive this. I wish best lucks for AMD as well.

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