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.