Intel Declares PC Market Has Hit Bottom

By Jessica Davis  |  Print this article Print

Processor giant Intel says PC market demand seems to have hit bottom, but when the recovery will arrive is another question. Intel is forecasting flat revenues for the second quarter, citing uncertainty in the market. Investors showed their disappointment in the outlook by punishing Intel with lower share prices.

Intel CEO Paul Otellini declared an end to falling PC demand, saying the industry has reached bottom. However, Intel's internal forecasts for the second quarter aren't showing much of an upside. And the news is better for OEMs who focus on the consumer side than it is for vendors who target IT enterprise customers

The processor giant's first-quarter earnings, released April 14, beat Wall Street expectations with revenue of $7.1 billion, down 26 percent from the same period last year and down 13 percent sequentially. Net income for the quarter was $647 million, down 55 percent over the same period a year ago but up 176 percent sequentially. 

"The consumer segment has held up much better than the enterprise," Otellini told analysts in a conference call following the earnings announcement. "This is particularly true in consumer notebooks, which continue to be the volume driver in this segment. Netbook sales continue to grow as anticipated and are clearly incremental volume for us in a difficult market.

Click here for more about Intel's quarter revenue as a bellwether of tech stocks

"In the enterprise segment, the server portion is in reasonable shape, partially reflecting demand for our newly released dual-processor products," he added. "The client portion remains weak, reflecting constrained budgets and redeployment of older equipment. The installed base of enterprise notebooks is now over three years average age and will need to be upgraded as capital budgets free up."

Intel says it is not providing an official forecast for second-quarter revenues but noted that its internal forecasts call for flattish revenues and a gross margin percentage in the mid-40 range. Investors and analysts found that disappointing, and Intel shares opened down this morning at $15.35. Ahead of the earnings announcement yesterday, Intel shares closed at $15.99

"With management saying that PC shipments bottomed in 1Q (thus implying they are improving), and with the Chinese New Year falling smack in the middle of 1Q, we are somewhat perplexed as to why Intel does not expect revenue growth in 2Q. We think conservatism and limited visibility is playing some role," writes analyst company FBR Research in a brief report following the earnings call with financial analysts.

Intel says in Q1 processor units were lower sequentially and the ASP (average selling price) for all microprocessors was approximately flat sequentially. Revenue from Intel Atom processors and chip sets, the CPUs used to power most netbooks, totaled $219 million, down 27 percent sequentially.
Jessica Davis covers the channel for eWeek and Channel Insider. Her technology journalism career began well before anyone heard of the World Wide Web and has included stints at Infoworld, Electronic News/EDN, and the Philadelphia Business Journal. Her work has also appeared on CNN and Forbes.com. She has covered hardware, software and networking, as well as the business side of technology. She has won several journalism awards, including a national ASBPE award for best staff-written column, and was named Marketing Computers hardest working tech journalist on their inaugural list of top tech journalists. Jessica can be reached at jessica.davis@ziffdavisenterprise.com