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Intel downgrades full-year business outlook

Second-quarter earnings are down from last year

By Martyn Williams
July 17, 2012 05:51 PM ET

IDG News Service - Intel warned Tuesday that it expects to see lower-than-anticipated growth for 2012 because consumer spending in Western Europe and North America has not recovered as predicted. The news came as the company posted mixed results for the second quarter of the year.

The world's biggest chip maker said net profit for the three months to the end of June was US$2.8 billion, down 4 percent from the same period a year earlier. Revenue was $13.5 billion, up 3 percent from the second quarter of 2011.

"As we enter the third quarter, our growth will be slower than we anticipated due to a more challenging macroeconomic environment," said Paul Otellini, president and CEO of Intel, in a statement.

Otellini made clear the company wasn't seeing a drop in consumer spending, just a slower recovery.

"We still see growth in all geographies and we are forecasting a stronger second half than first half," he told analysts on a conference call.

"What we had expected was that Western Europe and North America would be recovering from a softness we have seen for several quarters. As a result of not seeing that, sales of PCs are not as robust and inventory replenishment is not as broad as we thought."

As a result, the company expects to record annual revenue growth of between 3 percent and 5 percent this year, down from the "high single-digit" growth it had previously predicted.

The lower growth will see Intel slow the hiring of new staff in the second half of the year.

Despite the slow pick-up in spending, Otellini told analysts that demand from enterprise customers is growing. Emerging markets, such as Brazil, India and China, are still performing well, he said.

Intel's lackluster results come against a general lack of consumer enthusiasm for desktop and laptop computers in preference to tablets and smartphones. Global PC sales reached 87.5 million units in the quarter, virtually unchanged from the same period a year ago, according to figures from IDC. The drop was steeper in established markets like the U.S., where PC shipments dropped 5.7 percent.

While Intel sells chips that go into both tablet PCs and smartphones, the chips are not as powerful and don't carry the same price tags and profit margins as Intel's faster PC processors. Intel is trying to rekindle interest in laptop PCs with the Ultrabook platform, a sleek, thin design intended to bring Macbook Air-type style to the Windows PC sector, but the machines are still at an early stage.

A number of Ultrabooks are under development and prices are expected to hit $699 later this year, Otellini said.

One of Intel's biggest hopes for the consumer market in the next six months will be the launch of Windows 8, which is expected to lead to a jump in sales of PCs and tablets. The new operating system is expected before the end of 2012.

Martyn Williams covers mobile telecoms, Silicon Valley and general technology breaking news for The IDG News Service. Follow Martyn on Twitter at @martyn_williams. Martyn's e-mail address is martyn_williams@idg.com

Reprinted with permission from IDG.net. Story copyright 2014 International Data Group. All rights reserved.
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