bit-tech.net

Intel's margins fall on slowing demand

Intel's margins fall on slowing demand

Intel's Paul Otellini warns that the lean times may continue, but hopes that Windows 8 will help boost the PC market from its current slump.

Evidence that the PC market is shrinking continues to mount up, with Intel the latest company to warn that it has missed its targets for the financial quarter.

In its quarterly financial report, Intel announced that its gross margin for the quarter would be around 57 per cent. While that's a pretty impressive figure, it's quite some way short of the estimated 61 per cent analysts had pegged the company receiving.

The reasons given for the underperformance are familiar: Intel has blamed a slowing market for PC products, pointing the finger firmly at consumers waiting for the release of Windows 8 later this month before upgrading or purchasing new systems. A general shift in the industry to favour mobile devices - including tablets and smartphones - is also likely to have affected the company, whose Atom system-on-chip (SoC) products account for barely a single percentage point of the smartphone market.

'We believe that the Q3 PC sales grew approximately half of the seasonal norm and reflected flat enterprise sales,' Intel chief Paul Otellini told investors and press in the company's latest earnings call. 'As we look into Q4, we believe that the overall PC business will grow at about half of what we would expect from normal seasonality. Our revenue forecast growth is below these levels, as our customers are taking a cautious inventory approach in the face of market uncertainty and the timing of the Windows 8 launch. Our forecast assumes an incremental decrease in inventory and our customers going into year-end.'

Revenue for the quarter is expected to be around $13 billion to $14 billion, roughly on target with analysts' expectations - but as anyone who has run a business will know, revenue is nothing if the margins are shot.

With all that said, Intel is still performing well - especially compared to its rivals in the industry. AMD's revenue took a 10 per cent drop quarter-on-quarter, while margins slipped to 31 per cent compared to Intel's 57 per cent. Where AMD is looking to cut thousands of jobs to save cash, Intel is likely to just take the hit on its margins and continue as normal - something the far larger company can afford, thanks to a market cap some hundred times larger than that of AMD.

Intel's investors certainly don't seem to be worried. Since the company's earnings call last night, the share price has risen 2.85 per cent to $22.35 - helping to counteract a general fall in the company's value over the last month.

It's not just the silicon makers who are struggling with a slowing market, either: IBM's third-quarter revenue has been announced slipping 5 per cent, with server and storage hardware particularly badly hit with a massive 13 per cent drop in revenue. Despite that, Big Blue has been able to keep its spending in check and posted a five per cent jump in profits.

20 Comments

Discuss in the forums Reply
Spreadie 17th October 2012, 12:37 Quote
I'd say a combination the economic conditions and the longevity of their more recent platforms (1366 & SB 1155) is a major factor.
greigaitken 17th October 2012, 13:03 Quote
a q6600 is about 5-6 yrs old. its not bad and still has plenty power as the hand me down for another 5 yrs. amd equivelant same story. desktop cpus have a pretty long life now before they become too slow. i expect laptop sales keep things rosy-ish.
Niftyrat 17th October 2012, 13:22 Quote
Precisely, there is no compelling reason to upgrade anymore, I will not generally get a boost from CPU I would be better attacking my gpu instead or purchasing an SSD.

Same for memory upgrades more size yes, speed not as much
CAT-THE-FIFTH 17th October 2012, 13:53 Quote
Intel registered a 14% drop in profits and just over an 8% drop in desktop and laptop sales,and costs have increased by around 10% it seems:

http://www.slashgear.com/intel-q3-profits-fall-14-with-pc-demand-on-the-drop-16252253/

Increased revenues from their data centre operations have helped offset drops in other areas.

Intel even themselves predicted the drops ages ago:

http://newsroom.intel.com/community/intel_newsroom/blog/2012/09/07/intel-lowers-third-quarter-revenue-outlook

Revenue was predicted at $13.2 to $13.5 billion instead of the expected $13.8 to $14.8 billion earlier in the year. Hence,the actual revenue figures matched their revised predictions.

For the first time in a decade the desktop and laptop markets have contracted.

Looks like we need to welcome our new tablet overlords!!
GuilleAcoustic 17th October 2012, 14:01 Quote
my Q6600 is powerfull enough too. My only reasons for willing to upgrade it is : better efficiency, less heat, DDR3 + USB3 + SATA 3.0 support.

As mentioned, you get more when upgrading from an HDD to an SSD and upgrading your GPU (high end gpu tends to have longer life, so an upgrade every 3 years seams nice).
wafflesomd 17th October 2012, 14:24 Quote
Quote:
Originally Posted by greigaitken
a q6600 is about 5-6 yrs old. its not bad and still has plenty power as the hand me down for another 5 yrs. amd equivelant same story. desktop cpus have a pretty long life now before they become too slow. i expect laptop sales keep things rosy-ish.

I'm still rocking my Q6600 and have yet to feel that I need to upgrade. Nothing really taxes my system. I love this CPU :)
RichCreedy 17th October 2012, 14:39 Quote
I still have my qx6850, I am considering an upgrade though, as it is starting to show it's age
[-Stash-] 17th October 2012, 14:50 Quote
I too had an old q6600, but upgrading to a i5 3570k (4GHz ish OC) with 16GB RAM made a HUGE difference to my games. That upgrade (include a new motherboard obviously) clocked in at £300.

Not that a q6600 can't handle everything, the 3570k just handles it quicker and smoother. Even just in Windows, everything's much snappier with the IVB CPU. If you've been on the q6600 for more than a year or two, I wold definitely advise an upgrade at this point for the overall increased speed and of course: "better efficiency, less heat, DDR3 + USB3 + SATA 3.0 support."

If you *ever* do anything like compressing files (7-Zip/ WinRAR), video encoding (Handbrake), photo editing (Photoshop/Elements/Lightroom) or spreadsheets (Excel) that you will find big improvements in your workflows. Here's a q6600 vs 3770k comparison (3570k @4GHz is pretty much comparable, sometimes a little faster, sometimes a little slower than stock 3770k): http://www.anandtech.com/bench/Product/53?vs=551
[-Stash-] 17th October 2012, 14:52 Quote
Oh yeah, forgot to mention that in games, frame rates noticeably improved when upgrading the q6600 to a 3570k when running a GTX 570. And generally the minimum framerate was noticeably smoother.
blacko 17th October 2012, 15:16 Quote
i still rock a q6600. Run one in my ITX machine with a zotac 9300, 4GB of ram and a 550TI.
damien c 17th October 2012, 15:36 Quote
I would have upgraded a long time ago to Sandy Bridge E but, due to the price I have not upgraded because to get a performance boost from what I have now I would need to get the 3930K and to be honest, I just don't think it's worth the £800 it would cost me.

I would have gone for Ivy Bridge but thanks to the heat issue, Intel have caused me to avoid it and stick with my 2700K.

If they drop the prices abit then I think more people would upgrade from older hardware but because of the cost, they are not upgrading to newer stuff.

I built a pc the other week for a friend of a guy at work, and I ended up building it using AMD because I got the board, chip and ram for a total of £200 but a similar spec on Intel would have cost around £350 so it just made sense to use AMD instead.
steveo_mcg 17th October 2012, 15:50 Quote
I really need a new system. My now ancient Athlon II system is starting to bug me in lightroom and my 8800gts can't cope with anything bar decent console ports and valve games.
GuilleAcoustic 17th October 2012, 16:02 Quote
To be honest, I'm a little disapointed by Intel. Their CPU are nice, but their attitude is awful. I just bought an Atom D2700 based nettop for an uncle (internet and Ms Money use only) to discover that Intel provides graphic drivers for Windows 7 32 bit only ! No 64 bit support, no windows XP support, no Windows 8 support, no Linux support .... only Windows 7 32 bit ! And there will never be any support, they just abandonned the 64 bit support to focus on HD4000.

I was full AMD before bying the Q6600 .... my next CPU will be AMD for sure.
CAT-THE-FIFTH 17th October 2012, 16:33 Quote
Anandtech have some more information on this:

http://www.anandtech.com/show/6378/intel-q312-earnings-3-billion-profit-on-weakening-market-intel-to-idle-some-fab-capacity

It seems Intel has too much 22NM capacity ATM and is letting more than 50% of their fabs go idle.

I wonder if there are some bargains to be had in the next few months?? A number of retailers such as Amazon have had the Core i5 3570K for around £150,on and off for the last few weeks.
RichCreedy 17th October 2012, 16:37 Quote
Quote:
Originally Posted by GuilleAcoustic
To be honest, I'm a little disapointed by Intel. Their CPU are nice, but their attitude is awful. I just bought an Atom D2700 based nettop for an uncle (internet and Ms Money use only) to discover that Intel provides graphic drivers for Windows 7 32 bit only ! No 64 bit support, no windows XP support, no Windows 8 support, no Linux support .... only Windows 7 32 bit ! And there will never be any support, they just abandonned the 64 bit support to focus on HD4000.

I was full AMD before bying the Q6600 .... my next CPU will be AMD for sure.


have you looked here

xp support is null and void anyway, windows 8 hasn't officially been released, and in most cases you can use win7 drivers anyway
GuilleAcoustic 17th October 2012, 17:04 Quote
Quote:
Originally Posted by RichCreedy
have you looked here

xp support is null and void anyway, windows 8 hasn't officially been released, and in most cases you can use win7 drivers anyway

First place I looked at : http://downloadcenter.intel.com/SearchResult.aspx?lang=eng&ProductFamily=Graphics&ProductLine=Netbook+and+Tablet+Graphics&ProductProduct=Intel%C2%AE+Graphics+Media+Accelerator+3600+Series&ProdId=3468&LineId=3332&FamilyId=39

One and only one line : Windows 7 32 bit ! :(

I know XP support reached its end, and it's understandable as it has lastest for an incredibly long time. But the futur owner already has a valid XP licence from the computer it is replacing.
javaman 17th October 2012, 18:00 Quote
The rise of smart phones and cloud computing doesn't help either. Between peoples uses changing

1. Consoles holding back games
2. Facebook doesn't require a power house. Heck everything is being offloaded to the GPU anyhow
3. Rise of phones and tables handling what PC's where strong at. Stuff like basic image editing can be done easily enough and uploaded.
4. Lack of AMD competition keeping prices high meaning intel doesn't have to push for a major upgrade.
5. Rise in cloud computing.
6. Slow development in other areas of the PC. USB3 might of brought a reason to upgrade but PCI-e 3 is meh atm. SSD's can be dropped into any computer.
dolphie 17th October 2012, 21:59 Quote
I think the consoles holding back games is a huge factor. I was perfectly happy with my E6600 dual core conroe, it ran most stuff just fine. If it wasn't for Arma2, I probably would never have upgraded, but I went to a 2500k and that has served me well the past couple of years and I doubt I will need to upgrade it for some time.

As for work machines, where I work, most of them are still running Pentium 4's.
yakyb 17th October 2012, 22:40 Quote
Bought 2 Q6600's 5-6 years ago.

and 2 i7 860's 3-4 years ago

i have absolutely no reason to get a new one.

(although will be buying a i5 based surface in jan
rollo 18th October 2012, 16:37 Quote
I wish I could make 3bil and it be considered poor , Nokia just lost another $754million and that's considered good, AMD hugely in debt will lose more cash when results announced today and its dropping close to been worth $2 a share it was worth $10 8months back.
Log in

You are not logged in, please login with your forum account below. If you don't already have an account please register to start contributing.



Discuss in the forums