Intel: Stuck in smartphone, PC rut

Intel: Stuck in smartphone, PC rut

Summary: Analysts were heartened by comments from Intel CEO Brian Krzanich about mobile, but most analysts are skeptical about the company's ability to navigate the post-PC era.


Intel's second quarter wasn't so bad and the company cut its third quarter outlook in a move that surprised few analysts. But what's worrisome is the chip giant still doesn't have answers for a declining PC market and lack of smartphone and tablet traction.

The company reported second quarter earnings of 39 cents a share on revenue of $12.8 billion. Earnings were in line, but sales were light. Intel projected third quarter revenue of $13.5 billion, which was short of expectations.

On a conference call, CEO Brian Krzanich outlined his goals and said that Intel's ability to run both x86 and Android software will help it gain share in tablets. Krzanich was confident that Intel could get mobile traction.



"You'll look back and say wow, it's obvious that the Atom line has truly become strong and they've got share in the tablet space," he said.

Also: Intel's Krzanich outlines mobile goals following first quarter as CEO | Intel reports mixed Q2: Revenue light, earnings in line

Analysts weren't so sure. Here's a sampling:

Piper Jaffray analyst August Gus Richard:

With its new, low-end Atom processor, Bay Trail, the company is gaining traction in cheap notebooks and tablets, but we believe this is at the expense of higher-end core processors. Intel is late to the smartphone market and we believe high-end smartphone sales are starting to roll over. Intel is far behind its competitors in terms of cost and integration in smartphones, in our view. We do expect Windows 8.1 to drive a corporate upgrade cycle next year, creating a bounce in PC demand.

Cowen & Co. analyst Tim Arcuri:

On the plus side, second quarter and third quarter EPS guide both in-line, but on the flipside, even a slightly lowered full-year still requires a very big fourth quarter; we remain skeptical.

Jefferies analyst Mark Lipacis worried that Intel revenue could fall going forward as it aims to grab mobile share and cannibalizes its more lucrative PC chips.

Now that $350 tablets have taken share from $650 notebooks, as Intel and Microsoft have kept their pricing flat, we think a step-function decline in the ASPs from Intel and Microsoft is what is needed to drive unit growth again. The step function ASP drop may not be made up by increased unit sales, and Intel may suffer revenue declines as it transitions to a mobile-centric supplier of MPUs.

JMP Securities analyst Alex Gauna said:

We remain near-term cautious due to: 1) slow and still unconvincing progress in establishing a meaningful smartphone or tablet presence, 2) our view that Haswell and Windows 8.1 will prove too expensive and too uninspiring to stem eroding PC trends, and 3) our belief that Intel will need to cannibalize its Core product line with lower-cost Atom alternatives and reset gross margin targets lower to stem share losses to ARM.

Add it up and Intel needs to show traction in smartphones and PCs to get folks interested again.

Topics: Processors, Hardware, Intel, Mobility

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  • Larry, Adrian and all the ZD bloggers....

    Will you please cut the 'Post-PC' crap! It is a completely nonsensical term...
    The Central Scrutinizer
    • I totally agree!

      You act as if everyone is a paid Blogger or runs their business from a tablet. Seriously, when tablets/smartphones can run 64 bit software and cache 1.5 TB of project data...then we can talk.
      • No. The world IS in Post PC

        At home, I had regularly purchased a new desktop PC every 2-3 years. XP, Vista (unfortunately) and Win7. My current, and last purchased, PC is a Core 2 quad. I have most recently bought a Nexus 7. I actually spend most of my non-work time on the Nexus tablet.

        I am in no way expecting to purchase a new PC, in the foreseeable future. I used to buy a new PC when there was a new version of Windows. However, Windows 8 worried me. I had a quick play with the new interface in a couple of retails stores, and found it difficult to use. So I have not bought a new PC to get the new OS.

        So I can do most/all of my casual usage with the tablet. I have bought Pro Office to be able to use MS Office files. If I want to create/edit web pages, or do a bit of programming, my current PC is fine for the job.

        Yes! I work in the IT industry, but find myself embracing the Post PC happily!
        I am Gorby
        • Gorby, you are not the median

          In the consumer market, I could have predicted a shift to the handheld devices, since most people with a PC used it for browsing the internet and email and not much else. so of course a tablet or smartphone was appealing.
          If you can do everything you need on a tablet, then you never really needed a computer. They just did not have the device you needed at the time.
          This "right sizing" of devices for the average consumer has put computers back where they started, in the workplace mostly. It looks like a appocalyse to the vendors I suppose.
          • PC not dead but

            Intel has to keep posting revenue growth with margins of about 58% to keep Wall Street's peanut gallery happy. The issue is that you just don't upgrade PCs like you used to. Intel has to get into mobile and that's going to hurt margins. All of that is the post PC era problem.
            Larry Dignan
          • The term "Post-PC" is unfortunate ...

            ... And, it makes investors nervous that there is huge pent-up demand from consumers for tablets and that demand for PCs is leveling off. It is just like any other product category. Once the market is saturated, products become commodities and growth dries up.

            I would venture that most tablet owners have not disposed of their PCs but, because six-year-old PCs will run Windows 7/8, there is no compelling reason to replace their PCs. Meanwhile, there are lots of shiny new tablets and smartphones that people are spending their disposable income on these days.

            We are seeing a shift from computing on the desktop/laptop to computing in the clouds - but cycles are still being expended, and at an every increasing pace.

            What this means is that work that was once done on mid-range Intel x86 (and x64) processors sitting in a consumer's home is now being done on a cloud-based Intel x64-based server and it be being viewed on a consumer's ARM-based tablet or smartphone.

            For instance, my Surface RT meets all my needs but that is true only because I have remote access to my employer's Citrix farm, my desktop at work, and my desktop at home.

            Enterprise purchases keep profits up through large volumes sold at low per-piece cost.

            Tight competition for consumer devices though, force profits down while keeping costs somewhat fixed. Consumers buy on price and the enterprise buys based upon return-on-investment.
            M Wagner
          • Still Not a Fair Statement

            Cars use to last fewer years and rarely over 100,000 miles without requiring repairs that didn't make economic sense. Over the last many years, the "upgrade" cycle for cars has slowed greatly. This has NOT caused a Post Car Era.

            Replacing PCs every 6 years instead of every 3 is a clear sign of a maturing product landscape. It has nothing to do with a Post PC Era. (My extended family average has been about 6 years between replacement for the last 10 years.)

            While I agree there are hundreds of thousands of people throughout the world who no longer use a PC - just a tablet/mobile device - millions more each year get a PC due to population growth.
          • Apples and Oranges

            I don't think that's an apt comparison. The car isn't being replaced with a different type of vehicle. They're being replaced by longer lasting cars, and this is because the usage requirement for a car hasn't changed. People still need to get from A to B, quickly, comfortably, and with the freedom to determine their arrival and departure times. The car is the only thing that meets those requirements.

            If you only need to be able to browse the web, check email, and watch videos or listen to audio, the PC is no longer your only option. I agree that 'Post-PC' is a terrible name, but we have most definitely entered a time where a PC can be considered overkill for many users.
          • The car isn't being replaced with a different type...

            of vehicle.

            You must be too young to remember the minivan rage of the early 80's.

            Minivan sales were most definitely replacing car sales!!

            By ZDNet's rationale we absolutey in a Post-Car Era.
          • Did the Minivan make us Post-Car?

        • I don't think it's an accurate term.

          I don't think it's an accurate term. I believe "PC plus" is a more accurate term. People still use PCs. They just happen to use other devices as well.

          • That's right - the term is bad, but the reality is the same

            I think you're right that "Post PC" is a bad term. Not only are smartphones and tablets a great example of personal computers, just mobile ones, but most people still have and still will use desktops - they may simply replace them less often and need fewer of them.

            It would be far more accurate to refer to the "mobile era". That, however, would not change the issues for Intel.

            Intel is going to need to live on smaller margins. That will cause Wall Street to cough, but it is what needs to be done. This isn't a surprise - the mobile-to-cloud connection makes this just one more industry to be disrupted. At the end of the day, however, Intel's integration should allow it to maintain better profits (if not better percentage margins) than ARM and to compete very well.
          • pocket PC

            We call smart phones pocket PCs.
        • current PC is fine for the job

          You own a PC that means that you are NOT Post-PC!!
        • No, we just don't need NEW PCs all the time!

          My wife is still completely happy with her Dell PC that she bought back in 2002. It's still running the factory installation of Windows XP. She checks her email and Facebook on her Kindle Fire, but still uses the PC for composing email and documents.

          I'm still using the gaming PC that I bought as a barebones kit from Tiger Direct about 6 years ago. It still plays my two favorite games just fine on Windows Vista. I did upgrade to an SSD a couple of years ago, but I have yet to see a need to buy a new video card, let alone a new computer.

          In my opinion, the PC manufacturers created their own problem by finally finding a level of performance that is good enough for most people!

          It's similar to trying to sell someone a new car when their old one is working just fine for their needs.

          So, I argue that it's not a "post PC" era, but a "post PC consumption" era.

          Although I am entering this response on my phone, it would have taken 1/10 the time and irritation of typing on a tiny touch screen if I had simply walked in and touch-typed it on my PC. I think we all confuse convenience with laziness. Weird.
      • So because PC's couldn't run

        64 bit software and cache 1.5 TB of project data in 1996 people stopped using them...
        • 64 Bit Pocket PC

          Its coming in 2015, Samsung will probably release it in the Note 5 series of Galaxy phones, They have begun production of Arm 57 multi-core processors that will run ativ q android/windows so that you can drag and drop between environments. As far as 1.5 tb of storage, you can usb 3 to external hard drive and plug the hdmi into a hi res widescreen when you get home. Cloud via Dropbox should keep you synced.
      • I think you guys miss understand the term

        Post-PC does not mean no one uses them or cares about them or buys them. It means their dominance & influence has declined. Similar to living in a post-Christian world. Does that mean there are no Christians left or they have impact? No, it means that the level of influence the Jude-Christian ethic/worldview has lessened.

        Yes, you still need PC power for large projects that need power, speed, & space. But for consuming, perusing, & light content creation a good tablet will do. I personally don't see the PC dying anytime soon. The cloud sounds good in theory & some of it plays out well, but I cannot imagine editing 4k video content over the web is going to happen anytime soon.
        • Oh, they get it. It's just that

          they think their world view represents the mainstream of society when in reality, they are in the fringe. So, because PCs seem super relevant to them, they think PCs are remaining super relevant to everyone. That and they also don't like Steve Jobs, and he's the one that coined the phrase.
          • I'm still waiting for statistics other than sales.

            I'm still waiting for statistics other than sales to back that up.

            It's pretty disappointing that the only statistics that ZDNet uses are sales.