Intel: Messy quarter ahead, PC worries abound
Intel will report its first quarter results and they are expected to be messy on many fronts. The company had Sandy Bridge chipset woes, closed two acquisitions and is facing a slowdown in PC sales.
Wall Street is expecting earnings of 46 cents a share on revenue of $11.59 billion, but a miss wouldn't shock analysts. The big questions will revolve around whether Intel has an answer for tablets---the chip giant will begin getting Atom-powered devices in the field---and the outlook.
Piper Jaffray analyst Auguste Gus Richard is expecting a rough quarter. Intel will include results from McAfee and Infineon in its earnings report along with a $700 million charge over Sandy Bridge chipset problems. The company also reclassified the way it reports its divisions given those two deals.
Richard said in a research note that PC makers are hoarding components following the Japan earthquake. In addition, PC builds are being brought forward as logistics shift from air to sea due to high oil prices. These moving parts will give Intel a short-term boost.
Wells Fargo analyst David Wong said that PC market demand remained weak through March, but there was a pickup from contract equipment manufacturers. Translation: The inventory of Sandy Bridge desktop and notebook PCs was being replenished.
Richard said:
Beyond the near-term bounce in demand, we believe PC unit growth forecasts are too high in CY11 as consumers increasingly opt to purchase a tablet or smartphone rather than a PC.
Those consumer preferences were also noted in both PC market share scorecards from both IDC and Gartner. Richard argued that Intel has missed the mobile boat.
We believe the departure of SVP and GM of the Ultra Mobility Group, Anand Chandrasekher, after 24 years at Intel is clear evidence that Intel has mis-executed in smartphones. This is on the heels of Nokia dropping Intel's MeeGo, MSFT embracing ARM, and Intel becoming a 3rd tier choice for Android applications developers. We believe that it may already be too late for Intel in the 4th wave of computing as that ship appears to have sailed and Intel's PC legacy acts as an anchor.
Given those worries, analysts like Barclays Capital Tim Luke will want to hear a lot about Intel's smartphone strategy. The company bought Infineon. Now what will it do with Infineon. "We believe investors will be increasingly focused on the direction of the company’s strategy in the smartphone arena," said Luke.
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