Intel's mixed Q4: PC market stabilizes; tablets grow; data center sees 'slower growth'

Intel's mixed Q4: PC market stabilizes; tablets grow; data center sees 'slower growth'

Summary: Intel's fourth quarter gave fodder to everyone from skeptics to optimists. The chip maker delivered a mixed bag and sees more of the same for 2014.


Intel's fourth quarter results were a mixed bag relative to expectations, but the chip giant saw strength in the data center, held PC revenue flat and said it saw back-half growth in tablets.

The company reported fourth quarter earnings of $2.6 billion, or 51 cents a share, on revenue of $13.8 billion, up 3 percent from a year ago. Wall Street was expecting Intel to report fourth quarter earnings of 52 cents a share on revenue of $13.72 billion. Intel's earnings estimates crept up ahead of the company's results and the Thomson Reuters estimate was technical 51.6 cents a share. Analysts were expecting strong data center results. 

For 2013, Intel reported earnings of $9.6 billion, or $1.89 a share, on revenue of $52.7 billion, down 1 percent from 2012. Intel sees more of the same for 2014 and projected flat revenue for the year ahead.

As for the first quarter outlook, Intel projected revenue of $12.8 billion, give or take $500 million, with gross margins in the 59 percent range. Wall Street was looking for earnings of 42 cents a share on revenue of $12.78 billion for the first quarter.

In prepared remarks, Intel CFO Stacy Smith said:

While the PC market was down on the year, we saw the market stabilize in the back half of the year with fourth quarter PC units up from a year ago. Additionally we saw strong tablet growth in the back half of the year, and inclusive of PC and tablets, our unit growth in the fourth quarter was up almost 10% from a year ago. Our Data Center Group continued to benefit from the build out  of the cloud.

intel q4 overview


Regarding the data center, Smith said on a conference call:

If you look at the trends in the fourth quarter, I think the trends actually reinforce the growth rate among cloud, high performance computing, networking, storage. They all came in consistent with what we thought. As we entered Q4, we saw that we had more inventory out in the world than we knew when we started the quarter so that had to be burned off. And then secondly, we saw a tapering off in order patterns across certain customers. We think that was driven by the government shutdown and the uncertainty around the debt ceiling. Because when you look at the customers and the segments it's pretty clearly in those segments. We had a range around growth rates for 2014 and the investor meeting we said 10 to 15%. Based on a slower growth in enterprise in Q4 and maybe a slower recovery in enterprise over the course of 2014, I'd say we're now at the lower end of that range. So we're more at the 10% range than the 15% part.

Intel CEO Brian Krzanich said the company is reaching more platforms and at CES Intel "demonstrated multiple devices that weren't on our roadmap six months ago."

Nevertheless, Intel's PC revenue was flat in the fourth quarter compared to a year ago. Data center sales were up 8 percent from a year ago. And other Intel architecture---Atom---had fourth quarter revenue that was up 9 percent from a year ago.

Among the key takeaways:

  • Intel said desktop volume was up 7 percent with average selling prices up 5 percent in the fourth quarter.
  • Data center average selling prices were up 7 percent from a year ago.
  • Software and services revenue was up 7 percent from a year ago.
  • Intel ended the year with $20.1 billion in cash with $8.8 billion held in the U.S. and the rest offshore.
  • The company ended the year with 108,000 employees.
  • Research and development spending will be about $10.5 billion in 2014, flat with 2013.

Topics: Hardware, Data Centers, Intel, Processors, PCs

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  • Gartner and IDC figures incomplete

    So there you go. The Gartner and IDC figures must have been incomplete, as Intel saw a 10% unit growth (which includes tablets) YOY over the last quarter, while Gartner and IDC saw sizeable decreases. Also in the article you are taken to by the following link, an analyst from a site which seems intelligent, relatively unbiased, and down to earth, believes MS may have sold about 7.5 million Surface devices. Hopefully MS will provide that information when it reports its earnings later this month .
    P. Douglas
    • A strong quarter for Microsoft won't matter, because, it will still be

      doomed, and will go extinct soon.

      That is according to the anti-MS and anti-Windows crowd.
      • Yes, MS must go down!

        Those guys are going to be so mad! They would rather the Android tablet ecosystem win: you know the ecosystem in which virtually no one makes money besides Google. This of course would lead to the wiping out of the PC ecosystem, similar to the way Linux wiped out UNIX. This doesn't matter to them, as long as MS goes down! These guys are pathetic.
        P. Douglas
        • Read Engadget's biased reporting

          You should read Engadget's spin and even misrepresentation of Intel's numbers.

          The first paragraph of the article reads as follows:

          "Intel may have just validated concerns that the PC market was relatively weak in the fourth quarter. The company has reported a net profit for the period of $2.6 billion based on revenue of $13.8 billion, which is only slightly better than its performance last year; it's also a drop from what we saw in the summer. The company believes that Q4 showed "signs of stabilization" for the PC business, although the numbers also hint that a recovery isn't coming any time soon. While the firm's Data Center and Other Intel Architecture groups did boost their revenue year-over-year by 8 and 9 percent, respectively, its PC Client division was flat. In other words, any extra cash came largely from embedded chips (including mobile) and servers, not regular desktops and laptops."

          Now the words "relatively weak", is linked to a Gartner story indicating that PC shipments dropped by 6.9% during the last quarter. Further, the last sentence above says that "any extra cash came largely from embedded chips (including mobile) and servers". So Engadget dismisses the fact that sales of Windows tablets and other touch devices are taking off, and that PC unit sales overall were 10% better YOY for the last quarter. Engadget then frames the situation as though "the numbers also hint that a recovery isn't coming any time soon", apparently based on Intel's flat revenue projection for 2014. So Engadget willfully ignores the increase in Intel PC unit sales, the fact that Windows touch PC sales are taking off, and also indications that Windows tablets based on ARM, were likely good over the last quarter. Sigh.
          P. Douglas
          • I think you are expecting too much from

            m0r0ns aka Engadget. (m0r0n = an adult behaving like a 10 year old). probably I am doing disservice to 10 year old when comparing Engadget bloggers with them.
            Ram U