'Lack of innovation in the PC product cycle' spells problems for Intel: analyst

Intel may be one of the giants of the PC markets, but as desktops and notebooks give way to smartphones and tablets, the chip-maker faces increasing headwinds.

According to Stene Agee analyst Vijay Rakesh, neither the holiday season nor Windows 8 has helped to invigorate the PC industry much. To make matters worse, Intel's attempts to break into the mobile market are being thwarted by entrenched players.

In a note to clients, Rakesh points out that while Intel has introduced the Atom Z2420 32-nanometer dual-core processor which offers competitive battery life compared to previous generation Intel silicon, it will face challenges from the likes of Qualcomm and its latest Snapdragon hardware.

Servers are also no safe haven for Intel, as pressures from ARM 64-bit technology could erode the 60 percent server margin that Intel currently commands.

See also: Qualcomm makes play for high-end devices with Snapdragon 800 and 600

As far as tablets are concerned, Rakesh dismisses them as irrelevant. "We believe there is little excitement in the channel and the supply chain around WinRT or Win8 Pro tablets," he wrote.

Given this, Rakesh believes that Intel will report Q4 2012 revenues of $13.4 billion, or $0.44 per share, below analyst expectations of revenues of $13.5 billion, or $0.45 per share.

"While Intel has rebounded in the last month," writes Rakesh, it is primarily on near-term expectations of stable PCs and we believe the PC space remains challenged with increasing pricing pressures in servers from an ARM entry."

It doesn't get much better for Intel in the short term either. Rakesh believes that PC builds in Q1 2013 will continue to be slow, which will put a further drag on Intel's revenues.

In closing, Rakesh delivers damning condemnation of the PC industry. "A lack of a competitive ecosystem versus tablets and lack of innovation in the PC product cycle continue to be headwinds to driving upside."