Intel Reports Jump On Q2 Income, But Lowers Outlook For The Year

Intel reported mixed second-quarter financial results Thursday and lowered its earnings outlook for the year, citing continued economic uncertainty and sluggish PC sales as consumers wait for Windows 8 to launch this fall.

The Santa Clara, Calif.-based company announced a quarterly revenue of $13.5 billion, about a 4 percent jump from the $13 billion it reported during the same period last year. The company reported that its net income, however, fell roughly 4 percent year-on-year, slipping from $2.9 billion to $2.8 billion.

Intel slashed its full year-on-year growth estimate for 2012 from "high double-digit numbers" to 3 to 5 percent, due to weaker-than-anticipated PC sales in mature markets.

[Related: IDC: PC Shipments Drop In Q2, Dell Especially Takes A Hit ]

"What we had expected we would see by now is that the U.S. and Western Europe consumer business would be recovering from a softness that we have seen for several quarters," said Intel CEO Paul Otellini during a conference call with investors Thursday.

Otellini attributed lackluster PC sales to the notion that many consumers are waiting for this fall’s release of Windows 8, Microsoft’s next-generation operating system, before purchasing their next system. What’s more, he said, PC inventory levels are still slightly unstable from last year’s hard drive shortage caused by the Thailand floods.

Otellini pointed to Intel’s initiatives in the mobile market as a source of growth for the coming year. Specifically, he said he expects healthy sales for the upcoming Windows 8- and Android-based tablets that will run on Intel’s 32-nm Clover Trail processors. He also said he is "very confident" that the prices of Ultrabooks, the super-thin notebook form factor introduced by Intel last year, will drop as low as $699 during the second half of 2012, a move he expects will spark more consumers to buy.

Nearly 140 new Ultrabooks based on Intel’s new Ivy Bridge Core processors are currently in the pipeline, including 40 touch-enabled designs and a dozen convertible designs. According to Otellini, Ultrabooks are still on track to account for 40 percent of the consumer PC market by 2013, a figure Intel has been standing by since last fall.

"I am fairly confident we will hit our volume goal for this [Ultrabooks]," Otellini told investors.

Despite the anticipated success of Ultrabooks and Intel-powered tablets, the chip maker said it doesn’t expect those sales to materialize in its earnings numbers into early next year.

NEXT: Intel Also Places Its Bets On Smartphones

Intel has also taken strides to grow its share of the mobile market this year through new partnerships with smartphone makers including Lenovo and Motorola Mobility. Both companies pledged in January to roll out new smartphones running Intel’s Atom Z246 processor, code-named Medfield, by the end of the year.

Chinese handset maker ZTE and Indian handset maker Lava International also announced new partnerships with Intel, through which they plan to design new smartphones based on Intel’s Atom processor. Lava was the first out of the gate with its design, launching in April its Xolo X900 device in India.

The smartphone market today is largely dominated by U.K.-based chip licensor ARM, which licenses its low-power processor architectures to other chip makers including Qualcomm, Texas Instruments and Samsung.

In a recent interview with CRN, Jeff Chu, director of client computing at ARM, made note that Intel faces somewhat of an uphill battle in the smartphone space; the newcomer will face competition not only from ARM but also from its massive base of licensees. Collectively, Chu said, ARM-based chips are found in a staggering 95 percent of the world’s smartphones.

Intel saw significant growth in its Data Center Group during the second quarter, reporting a revenue of $2.8 billion, up 14 percent year-over-year.

PUBLISHED JULY 17, 2012