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Intel profits down 25 per cent year-on-year

Intel profits down 25 per cent year-on-year

Intel's profits have dropped 25 per cent year-on-year as a result of the PC market slump, but the company's investors are convinced it can weather the storm.

Intel has become the latest company hit by the global slow-down in the PC market, announcing a whopping 25 per cent dip in profits for its latest quarter.

That's not to say the chip giant is hurting, of course: despite slow sales that are causing heartache for most PC makers, the company reported net income of $2.05 billion for the most recent quarter - equivalent to earnings of 40 cents per share. Those are the sorts of numbers for which its rivals would kill, but for Intel it represents a serious dip: the same period last year saw the company rake in $2.74 billion, or 53 cents per share.

The PC slump has brought with it some tightened margins at the semiconductor specialist, it seems: revenue for the quarter was down $12.58 billion from $12.91 billion for the same period last year, revealing that Intel's 25 per cent dip comes as a result of lower profit margins rather than a serious reduction in orders.

For chief executive Paul Otellini, the figures are a relative high on which to exit. 'Amidst market softness, Intel performed well in the first quarter and I'm excited about what lies ahead for the company,' Otellini, who is to retire from the company during the next financial quarter, told press, investors and analysts during the company's latest earnings call. 'We shipped our next generation PC microprocessors, introduced a new family of products for micro-servers and will ship our new tablet and smartphone microprocessors this quarter; we are working with our customers to introduce innovative new products across multiple operating systems; [and] the transition to 14nm technology this year will significantly increase the value provided by Intel architecture and process technology for our customers and in the marketplace.'

For whomsoever is to fill Otellini's shoes at Intel, the figures reveal much about what needs to change at the company: while server revenue was up 7.5 per cent year-on-year, its desktop and laptop division saw revenue drop six per cent in the same period. The company's renewed focus on the mobile market, which has seen it develop low-power system-on-chip products based on its Atom architecture for the first time in order to better compete with Cambridge-based rival ARM, will likely be the company's ticket to continued growth at a time when the consumer market appears to be spending cash on tablets and smartphones rather than desktops and laptops - a progression the company has Otellini to thank for spearheading. 'We can now compete wherever there is computing,' he added.

The next quarter will be a proving ground for Intel: with its CEO leaving to enjoy retirement and its latest Haswell architecture chips to launch, the company is hoping to boost revenue significantly - but if the launch of Haswell, combined with Intel's promises that low-power touch-screen Windows 8 laptops will hit a sub-$200 price bracket thanks to new Atom processors, doesn't inject some movement into the stagnant PC market, it could easily fall short of its projected $12.9 billion revenue target.

Investors, however, don't seem to be too concerned: in a united show of faith in the company's future, trading has seen the company's stock price rise 2.5 per cent to $21.92 since the financial figures were released, but still remaining down on their $29 high this time last year. For comparison, AMD's stock is up 1.67 per cent in the same trading period - thanks largely to rumours that the company has won presence in all three upcoming next-generation games consoles - while ARM Holdings is down 1.01 per cent.

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damien c 17th April 2013, 10:56 Quote
Maybe if they dropped the prices of the SB-E cpu's then more people would buy them which in turn would bring more profit, as I am pretty sure most people wouldn't mind paying £300 to £350 for a 6 core SB-E cpu, compared to £440 - £1000 at the current prices.


Maybe also if they made a low priced but decent performing cpu on the cpu side of performance but also included in the cpu a decent performing gpu to compete, with the AMD APU's then they again would sell more of them.


The pc market slump cannot be blamed for every company loosing profits, but those companies should look at how to gain more customers and 9 out of 10 times if they lowered the price they would sell more, and eventually recover the costs of developement etc or am I just mistaken.


I also think though that the lack of games/programs taking advantage or needing more performance from a cpu is causing issues, because let's face it really at the moment gamers don't need more than a Dual Core cpu although most will be running a Quad Core, but because they are not being used by games and programs people are just not upgrading because they don't feel the need to.

I only upgraded from a Quad Core to a 6 core simply because I am starting to more video editing, but if it was not for that I wouldn't of bothered spending nearly £1100 on upgrading my pc and instead would have had one really good weekend in a pub :)
runadumb 17th April 2013, 11:44 Quote
Quote:
Originally Posted by damien c

I also think though that the lack of games/programs taking advantage or needing more performance from a cpu is causing issues, because let's face it really at the moment gamers don't need more than a Dual Core cpu although most will be running a Quad Core, but because they are not being used by games and programs people are just not upgrading because they don't feel the need to.

I only upgraded from a Quad Core to a 6 core simply because I am starting to more video editing, but if it was not for that I wouldn't of bothered spending nearly £1100 on upgrading my pc and instead would have had one really good weekend in a pub :)

This part makes the rest of your comment null and void.

They can lower the prices all they want, the masses don't care, their current rig is fast enough.
chrisc1277 17th April 2013, 11:48 Quote
Quote:
Originally Posted by damien c
I also think though that the lack of games/programs taking advantage or needing more performance from a cpu is causing issues, because let's face it really at the moment gamers don't need more than a Dual Core cpu although most will be running a Quad Core, but because they are not being used by games and programs people are just not upgrading because they don't feel the need to.

Took the words right out of my mouth. When software catches up with hardware, only then will i start thinking about upgrading my cpu.
damien c 17th April 2013, 12:01 Quote
Quote:
Originally Posted by runadumb
This part makes the rest of your comment null and void.

They can lower the prices all they want, the masses don't care, their current rig is fast enough.

True but also some people will upgrade because they feel like it will last longer than there current cpu will, such as for me I won't need to upgrade really for along time but I will probably get the want feeling to upgrade around this time next year simply because, there will be newer and faster cpus out by then.
runadumb 17th April 2013, 12:14 Quote
Quote:
Originally Posted by damien c
Quote:
Originally Posted by runadumb
This part makes the rest of your comment null and void.

They can lower the prices all they want, the masses don't care, their current rig is fast enough.

True but also some people will upgrade because they feel like it will last longer than there current cpu will, such as for me I won't need to upgrade really for along time but I will probably get the want feeling to upgrade around this time next year simply because, there will be newer and faster cpus out by then.

Oh I'm with you, my first gen i7 920 is fine for 99% of my usage. It doesn't stop me wanting to upgrade to Haswell for the extra speed, lower power consumption,UEFI motherboard and other benefits.

I just don't think intel lowering their prices to appeal to that percentage of the market would do damn all for their profits.

Hey, I would LOVE to be wrong.
Snips 17th April 2013, 15:10 Quote
Quote:
Originally Posted by damien c
to compete, with the AMD APU's then they again would sell more of them.

I'm still crying with laughter at that one. So are you saying this "slump" is down to AMD's APU?
Gareth Halfacree 17th April 2013, 15:32 Quote
Quote:
Originally Posted by damien c
Maybe if they dropped the prices of the SB-E cpu's then more people would buy them which in turn would bring more profit, as I am pretty sure most people wouldn't mind paying £300 to £350 for a 6 core SB-E cpu, compared to £440 - £1000 at the current prices.
That's, sadly, pretty far from how profit works.

Profit - also known as "net income," particularly when you're dealing with USian companies - is your revenue minus your costs. Your revenue is all the money you received from your customers (or, indeed, any other source, including government handouts.)

If you take a closer look at the figures in the article, you'll see Intel's revenue was down only a few per cent compared to this time last year - but its profit was down by a quarter. If Intel dropped its prices to encourage volume sales, it would be increasing its revenue but decreasing its profit margin - exactly the opposite of what it actually needs to do. Intel needs to find a way to keep revenue stable but increase profits - either by trimming its costs by reducing headcount, finding cheaper ways to make processors, renegotiating its supply contracts, increasing yield, or by increasing the cost of its processors.

That's exactly what it's going to do, incidentally: we're approaching the launch of Haswell, which will cost more than the equivalent Ivy Bridge chip costs now. While yields may be lower, it's fair to assume that Intel is going to be looking to make more profit on its new Haswell chips than its old Ivy Bridge chips - just like it did when it launched Ivy Bridge, making sure the chips cost enough to make a healthy profit compared to the several-times discounted Sandy Bridge equivalents. Over time, as sales drop and revenue threatens to sag, Intel will reduce the cost of Haswell chips - and, eventually, replace them with the suddenly more expensive Haswell successor.

If Intel took your approach, it would have to go gangbusters on sales to benefit: if it halved its profit, it would have to double revenue just to make up for that loss; if it wanted to actually fix the 25 per cent dip in profits, it would have to do even better than that. Profits on the already-discounted Ivy Bridge chips aren't going to be terrifically high as it is: if prices dropped by $10 on a $150 chip, could you realistically see it selling three times as many?

tl;dr: Intel needs to sell more expensive processors, not higher volumes of cheaper processors, if it wants that worrying graph to change direction.
rollo 17th April 2013, 23:37 Quote
The market is dieing simple as that, Intel Arm and AMD have all took hits in the last quater due to lack of demand and market saturation.

Basic facts are this, Most users do not need a 6 core cpu period they dont even need a quad core cpu.

Duel core is still more than enough for 99% of foke out there. As all they do is facebook, Word process, or email. ( the 3 biggest uses of a pc, Gaming and photo video work is not even in the same % of uses)

Software is trailing hardware by about 8 years now and that gap is growing at a steady pace. My mam your general user call it uses a core 2 duo with SSD in the pc its still not been pushed for her 3 basic uses of it. ( SSD was mine but i upgraded)

Most of my general user relivetives are still on pcs from 5 years + Ago brought from pc world cause it does what they want. Windows 8 or 7 is a big no no for them as they have no intrest in it at all.

Gamers and Video / photo work the things that might require more hardware represent probably at best 1% of the total population of pcs in the world. ( and id say thats a high estimate )

Intel will be fine all things considered there share price has not moved since these results where released ( technically speaking its gone up ) which is because there server hardware sales are growing and they control alot of that sector (We are talking 80% + of the big money sector basically 50-60% margins )

If you think enthusaists are intels main profit makers your in dream world. In the uk there will be less than 10000 people who would even fit that title. ( even if everyone of those people brought a 3770k for £250 intel would be only looking at £2.5million thats a drop in the ocean really) Even if you scale that up to say 100k people its still only £25 mil we are not talking large numbers here. ( id be shocked if 100k 3770ks have been sold in the united kingdom)

For arguments sake lets say intel drops the 3770k to £150 they would need to sell it to 66000 more people to make the same money as selling it before at £250 thats alot more sales 50% or so. They are not going to get that sort of sales increase just by dropping the prices down. As the Customer base is just not there.

Each intel Xeon chip sells for around £2200 minimum and there is huge margin on these chips.

Intel for the record only upgraded its GPU to sell more chips to Apple. ( they pretty much said as much in a press conference) As Apple had threatended to go to AMDs APU if the performance was not brought into line for its Macbook Line.
schmidtbag 18th April 2013, 04:13 Quote
Lowering prices is not going to help in the long run - all it will do is motivate people to upgrade a little sooner, an upgrade that will prevent the need for another "long-overdue" upgrade.

At this point AMD and Intel need to stop focusing on performance - we don't need it anymore. Servers obviously can't get enough of it, but the real focus now is making things cheaper, cooler, and more power efficient. There's a reason why ARM is doing so well lately - a quad core cortex-a9 or a dual core a15 is all the average person needs, and they're power efficient enough to run in phones. Today, we're in a special time where people can afford more than 1 system. Why don't people just build 1 computer for low-power casual use and then another one for serious demand? Maybe even a 3rd computer just for gaming. Many people seem to get into the HTPC idea lately too, which falls under this. I feel that using separate computers for separate needs would end up being more cost effective in the end (in terms of power consumption and wear on parts) and would make hardware companies have a steadier income.

My overclocked triple core Athlon II is still handling everything I throw at it. I might have a longer wait when I compile, extract, or encode/decode something, but anything live such as gaming never maxes out my CPU. The only reason I'm considering upgrading is because of power efficiency. Unfortunately, there aren't many (if any) AMD CPUs that are faster and more efficient than an Athlon II. AMD is so desperately focusing on outperforming intel that they overlook how ridiculously power demanding their FX series is. The sad thing is their FM2 socket processors are more than good enough for the average user, but people care more about arbitrary numbers, which brings down their reputation.
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