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Topic: Hardware

Intel cuts outlook; Consumer PC demand weak

Summary: Just weeks after an upbeat assessment about its prospects, chip giant Intel cut its revenue outlook for the third quarter based on weak demand for consumer PCs.

Larry Dignan

By for Between the Lines |

Just weeks after an upbeat assessment about its prospects, chip giant Intel cut its revenue outlook for the third quarter based on weak demand for consumer PCs.

The company said in a statement that third quarter revenue will be $11 billion, give or take $200 million. That's down from a previous outlook of $11.2 billion and $12 billion.

Wall Street was expecting revenue of $11.52 billion with earnings of 53 cents a share.

According to the company:

Revenue is being affected by weaker than expected demand for consumer PCs in mature markets. Inventories across the supply chain appear to be in-line with the company’s revised expectations.

Intel expects gross margins to be about 66 percent, down from the 67 percent it projected. Enterprise demand appears to be solid.

The news is quite a turnabout from Intel's outlook on July 13. On its second quarter earnings conference call, Intel was upbeat. Nevertheless, some analysts noted that semiconductor companies are always last to know that a downturn is coming.

However, Intel's news shouldn't be that surprising and arguably could have been worse. Analysts have been downgrading Intel and AMD because the Asia PC supply chain looks worrisome.

Among the key worries over the last month:

  • Wedbush analyst Patrick Wang said “following a round of industry checks, we come away incrementally more negative on the PC supply chain, in light of lowered 3Q forecasts for both Intel and AMD as well as an expectation for softer DRAM pricing and questionable demand.”
  • Analysts said that inventories are rising and visibility into demand is hazy at best.
  • Notebook builds were tepid in July and distributors are cutting inventory levels.
  • Back-to-school demand just isn’t there. Barclays Capital analyst Tim Luke said “while still early in back to school cycle, broader PC trends for 3Q have continued to remain subdued & seasonal sales guidance may prove bold.”
  • Meanwhile, Baird downgraded Intel based on weak PC demand. J.P. Morgan noted that PC orders are falling off a cliff.

Topics: Hardware, Banking, Enterprise Software, Intel

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28 comments
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  • RE: Intel cuts outlook; Consumer PC demand weak

    To wax philosophical, I think the weak demand for new PCs is because of the profound disappointment of the Windows 7 operating system. I was so frustrated by it that I reloaded Vista on all my computers. To me, Windows 7 is Vista gone backwards. I sure hope Microsoft rethinks how it designs operating systems.
    ITOdeed
    Reply Vote

    • RE: Intel cuts outlook; Consumer PC demand weak

      @Micromush You are kidding, right?
      adli89@...
      Reply Vote

      • RE: Intel cuts outlook; Consumer PC demand weak

        @adli89@...

        Not kidding. I'm a power user and use VMware to load other operating systems in VMs, Windows XP Pro, Ubuntu. After I upgraded Vista to Windows 7, then tried to use VMware, I ended up with no USB capabilities. Could not print invoices because printers use USB ports. Windows 7 has serious compatibility problems, just as Vista did when it came out. Until all bugs are fixed, I'll keep using Vista with VMware so that I can do some business.
        ITOdeed
        Reply Vote

    • RE: Intel cuts outlook; Consumer PC demand weak

      @Micromush
      should have tried Linux, not windoze.
      Linux Geek
      Reply Vote

    • RE: Intel cuts outlook; Consumer PC demand weak

      @Micromush

      Not so fast one person does not dictate the entire market. I just finished a 97 machine deploy, all Windows 7 machines.
      Scatcatpdx
      Reply Vote

    • RE: Intel cuts outlook; Consumer PC demand weak

      @Micromush Power User?? Not from where I'm sitting! I've had NO problems in deploying Win7, and nobody I know has! Profound disappointment? What planet are you on? Sounds to me like you need some professional IT help!
      barefoot1976
      Reply Vote

    • RE: Intel cuts outlook; Consumer PC demand weak

      @Micromush - I disagree. Win7 isn't perfect by ANY means, but I've grown to love it more than OS X at this point... and it's rather better than Vista, which drove me to OS X to begin with. A shame Apple drive me away from it, but that's their loss.

      Not to mention, this so-called "economy" is why sales are weak. Nobody has money and, adjusted for inflation, many jobs' pay has decreased since 1980.
      HypnoToad72
      Reply Vote

  • RE: Intel cuts outlook; Consumer PC demand weak

    Look for some even cheaper laptops come 4Q!
    Colorado_AL
    Reply Vote

  • Its about cost

    Let's face it. The fact PC's are slowing down has nothing to do with Windows 7 being bad. Its about archaic hardware that won't run it. Companies made the decision to ignore Vista and that only delayed the fact that hardware needs to be upgraded. But then the deep recession came and its still here! So until their is a budget for new hardware their is going to be Windows XP.
    jscott418-22447200638980614791982928182376
    Reply Vote

    • RE: Intel cuts outlook; Consumer PC demand weak

      @jscott418 Yeah, this sounds more like what's really going on! Archaic hardware is a more likely thing, but what're you calling archaic?
      barefoot1976
      Reply Vote

    • RE: Intel cuts outlook; Consumer PC demand weak

      @jscott418 - I don't agree. My work machine was upgraded to Win7. (AMD Athlon 4200 CPU with 4GB RAM, which is considered 'archaic'). Win7 runs faster, in some ways, than XP. Slower in some, but Win7 is certainly superior to Vista where it counts the most.
      HypnoToad72
      Reply Vote

    • Would be nice

      @jscott418 If we didn't all have to double our PC hardware to get pretty much the same performance and capabilities just to "upgrade" our OS.
      _Papa_
      Reply Vote

  • Intel Corp

    Continues to claim that a lack of skilled engineers in the domestic employee pool will result in the next big thing coming from overseas, not the U.S. Meanwhile Linux advocates continue to try and lay the blame for declining PC sales on Microsoft and Windows 7, but the fact remains the *current* big thing came from Cuppertino, California and along with products built on Google's mobile OS platform, they're an exploding segment of the industry in a time of stagnant traditional PC growth.

    When IBM manufactured the original PC 5150 and IBM/XT they regarded them as low margin toys and ignored a market that became the architecture that the entire enterprise and corporate desktop is built on, today. It was the beginning of the end of 100 years of business machine dominance for IBM.

    The only thing that looks different to me is that the cycle is accellerating.
    dcolbert@...
    Reply Vote

    • RE: Intel cuts outlook; Consumer PC demand weak

      @dcolbert@... the only "lack" is due to pay rates, adjusted for inflation, being lower now than in 1980. There's no ROI for the industry any longer. Not for Americans and we have LOTS of unemployed skilled talent here in America.

      Companies just want to pay b.s. wages and then wonder why people don't have money to spend, or to keep buying educational materials for jobs that won't be there (DUH)... or have time to raise their families, but I digress...

      And if people read the TOS for cloud-based sites, they'd think twice. Even I have to support facebook over a lawsuit lobbed at them by a couple teens who were 'shocked' to see their photos advertising the company. RTFTOS, folks... they give themselves a free hand to your IP in return for your using the site for "free"...
      HypnoToad72
      Reply Vote

  • RE: Intel cuts outlook; Consumer PC demand weak

    Intel has no need to worry. John Donahoe (aka Peter Principle) is on the Board; he will have all the answers. Just look at how he is "turning around", and around, and around, eBay, in it's current spiral downwards! How did this incompetent, inarticulate, sociopath ever make a favourable impression on anyone? Sheesh.

    Shill Bidding on eBay: Case Study #4
    This latest study demonstrates eBay?s utter desperation for revenue; and, once again very effectively, eBay?s effective aiding and abetting of this criminal activity, at
    <url>http://forums.auctionbytes.com/vbulletin/showthread.php?t=23540</url>
    Philip Cohen
    Reply Vote

  • Slumping PC sales? Ain't happening to Apple.

    Electronista on same Intel news:<br><br>"Intel warns of low summer PC sales<br><br>"Both Acer and Samsung are either known or believed to be lowering expectations for netbooks as customers either jump ship for the iPad or for an internally developed tablet"<br>"The slump could mute earlier gains for many of the top tier companies but won't necessarily affect all. Apple has continued with above-average growth and so far hasn't shown signs of slowing down in the summer"<br><br>----<br>only problem with the eletronista article is "or for an internally developed tablet" . What PC tablet is selling well?<br>NOTE: most analyst firms count Tablet PCs into Pc numbers but NOT iPads. (analyst firms sell their data to PC companies who use their data for bank loans, marketing etc. and the numbers are always skewed to show great PC numbers. NPD said they would count HP Slate running windows but NOT iPad. When HP bought Palm and wanted to load Web OS on the Slate instead of Windows NPD was asked whether they would count Slate running WebOS. NPD refused to answer! LOL) If they counted iPads as computers Apple numbers will even be higher as Apple is selling as many iPads as Macs.
    Davewrite
    Reply Vote

    • You do understand...

      @Davewrite

      ...that Macs also run on Intel chips? How about that Macs are a teacup in the ocean of worldwide sales? Sure, Apple sales are up, but when you are a tiny niche player even a small increase in units shipped looks huge when expressed as percentage growth.
      itpro_z
      Reply Vote

      • yep the run intel, but intel slump not caused by macs

        @itpro_z

        you say " you do understnad that Macs also run on Intel chips". Of course that's what I 'm pointing out: Intel sales slump does not equal Mac sales going down as sources say Mac sales are up. Intel slump is just for Intel Win Pcs.

        As for mac marketshare, small or not, Apple sales number is going UP, win PCs are going Down.
        Last year Apple was already making 35% of the worldwide PROFITS of worldwide personal computer sales even with it's small market share. Any growth will result in even bigger profits for Apple.

        If you want to talk more about market share though Apple sells around the same number (or more) of iOS devices (iPhones, iPod touches, iPads) as all the netbooks put out by all the manufacturers and people are using them to replace netbooks and that has put a dent into netbook sales causing a slump in PC sales numbers.
        Davewrite
        Reply Vote

      • RE: Dave

        Dave, I do understand that Apple is very profitable at what they do, but they are still a small niche player in the PC market. Yes, they do very well with their consumer electronics, yet as a computer company they don't even register on the world wide market.<br><br>Your comparison of Apple's sales of phones and media players to netbooks is just plain silly. Netbooks are a completely different market. Yes, there is a bit of overlap, but the i devices are toys for content consumption, while netbooks are computers for both consumption and creation.

        You might want to consider that with the economies of the world in serious decline those companies that sell expensive, luxury items are generally hit the hardest. Macs and i devices are fine pieces of equipment, but what do you get for the premium price beyond a fashion accessory?
        itpro_z
        Reply Vote

      • Just plain silly? Here, lol

        @itpro_z

        you say :
        "our comparison of Apple's sales of phones and media players to netbooks is just plain silly. Netbooks are a completely different market."

        WIRED magazine May:

        (Netbook sales...)
        "It fell off a cliff in January and shrank again in April ? collateral damage, according to Huberty, from the January introduction and April launch of the iPad.?

        Of course, looking at the graph you?ll notice a general decline in netbook sales over the course of 2009, so it?s possible that the downward trend simply carried over to 2010. However, corroborating the correlation between the introduction of the iPad and shrinkage in netbook sales, Huberty also cited a survey conducted by Morgan Stanley in March, which found that 44 percent of U.S. consumers who were planning to buy an iPad said they were buying it instead of a netbook or notebook computer."

        ---
        that research was even BEFORE iPad sales took off , before iPad became available in more countries.
        dudes, do some research before saying others are silly.
        Davewrite
        Reply Vote
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