Intel has seen itself stuck in a difficult position as its primary business — PC processors — gets marginalized by the growth of smartphones and tablets powered by competitors' chips. The company is managing to keep up with expectations, however, as it revealed in its earnings report today that it earned a total of $3.2 billion on $13.5 billion in revenue during the quarter. While Intel may have met Wall Street's expectations, it is clear that it's feeling the effects of the decline in PC sales (despite the recent launch of Windows 8), and Intel knows it. CFO Stacy Smith admitted "the PC market segment was impacted by the growth of tablets." The company pulled in $400 million less than it did during the same period last year, and for the entire year, Intel is reporting a net income of $11 billion on $53.3 billion in revenue — a 15 percent drop compared to 2011. Additionally, the company's PC Client Group is reporting a six percent drop in revenue year-over-year, and Intel's "other" architecture group's revenues were also down seven percent.
This time last year, decreases in Intel's Q4 2011 earnings were explained by the rapid decline of the netbook and flooding in Thailand, both of which heavily impacted PC sales. The effects on the market from flooding has mostly subsided by this point, and the netbook was effectively killed off during 2012; declines in PC sales now can't be so easily explained by one-off events like these. Instead, trends like the so-called "post-PC" era and a continued movement towards mobile computing may be what Intel is up against.
"The PC market segment was impacted by the growth of tablets."
Intel does have its own plans for keeping relevant should it truly be in the throws of a "post-PC" era: the company is looking to stoke interest in laptops with its newly-announced, next-generation ultrabook requirements, which should produce quality touchscreen machines that have "all-day" battery life thanks to the Haswell chips that will power them. Additionally, Intel has made its play in the mobile game as well, with its new Atom smartphone processors. The company hasn't spoken about its mobile plans in today's report, but we'll be listening in to the earnings call at 5PM ET to hear what it has to say.
Update: There were no major surprises during the earnings call, though there were a few interesting details. In response to a question asking if ARM is catching up to Intel based on early Cortex-A15 benchmarks, Intel CEO Paul Otellini said "we're very comfortable that we can maintain a performance lead here." Additionally, we heard from Intel that it has already begun production of its Haswell processors — though we still don't have a date for when we should expect them in market. Lastly, CFO Stacy Smith said that company expects its smartphone processors are "not going to move the needle from a revenue standpoint" anytime soon. We wouldn't have expected any different, and Intel will have to up its game considering the Atom-based smartphone we saw from the company at CES.
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