Intel Profits Decline, Follow Trend In Slow PC Sales
January 18, 2013

Intel Profits Decline, Follow Trend In Slow PC Sales

Lee Rannals for — Your Universe Online

Despite a stabling economy, Intel seems to be on a decline, with technology research firm Gartner reporting a 27 percent fall in profit for the chipmaker.

The world's biggest semiconductor maker saw a drop in PC shipments worldwide to 3.5 percent in 2012, according to Gartner.

Intel reported in its fourth-quarter earnings report on Thursday a net income of $2.5 billion, which was down 27 percent compared to a year earlier. The company also reported that its revenue had dropped 3 percent to $13.5 billion from $13.9 billion a year ago.

Paul S. Otellini, Intel's chief executive, told analysts in a conference call that its excuse is that the PC business is evolving.

As PC shipments began to drop, smartphones and tablets began to fill in the empty void a new laptop once filled. Sixty-four percent of Intel's revenues come from the chips it puts in a PC. However, the company has thrown its hat in the ring for smartphone and tablet chips, and could be thriving on that move in a few years time.

While the revenue report was about what analysts had predicted, the net income by the company was actually 45 cents a share higher.

As Intel battles a market that is being overtaken by smartphones and tablets, Qualcomm, a company known for making chips for those devices, now has a higher market capitalization than Intel.

"Over the last six months, shares of Intel have fallen about 18 percent, while Qualcomm´s stock is up almost 20 percent," Quentin Hardy, a writer for the New York Times, said in a report. "ARM Holdings, which sells designs for low-power chips popular in mobile devices, is up almost 90 percent in that time."

During the call, picked up by ABC News, Otellini said the company's latest "Atom" processors, which are used in ten tablet models, will be able to yield the same, or better, life as the competition, giving the company an edge over Qualcomm and ARM Holdings.

For this quarter, Intel is predicted about $12.7 billion in revenue, which is below the analyst forecast of $12.9 billion. The company is forecasting a revenue percentage increase in the low single digits for the full year.

During 2012, Intel earned $11 billion on $53.3 billion in revenue, and both of those figures were down from the previous year.

Ultimately, in order for Intel to keep its stronghold in the semiconductor market, Intel has to grab even more smartphone and tablet market share.

“Longer term, Intel will move more aggressively into smartphones,” Bobby Burleson, an analyst with Canaccord Genuity, told the Times. “But everyone worries about their long-term gross margins.”