Intel Sees Minimal Revenue Growth on Blurring of Tablets and PCs
Reflecting the “challenging environment,” Intel PC Client Group revenue was down 6 percent in Q4 over the year-ago quarter to $8.5 billion, the company said in its earnings report. With “relatively soft PC demand and weak macroeconomic conditions,” Intel generated sales of $53.3 billion, operating income of $14.6 billion and $11 billion in profit in 2012, CEO Paul Otellini said on an earnings call last week. Otellini cited “tremendous progress” entering the smartphone and tablet markets, working with partners “to reinvent the PC” and continuing to drive growth in its data center.
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Reflecting on CES earlier this month, Otellini commented on the industry’s “renewed inventiveness” in the midst of “radical transformation” in computing due to the “blurring of form factors” and adoption of new user interfaces. In a reference to the growing tablet market that has taken market share from notebook PCs, Otellini said, “It’s no longer necessary to choose between a PC and a tablet” since convertible and detachable PCs using Intel processors and Windows 8 touch technology “provide a two-for-one, no-compromise computing experience.” Otellini said tablets are going to have “the same spectrum of performance requirements” as PCs over the last two years.
Intel has “modest expectations” for unit sales of traditional PCs for 2013, said CFO Stacy Smith. Growth will come from devices that “sit in the middle,” he said, referring to convertibles that she called “the best of the tablet and the PC” and then later, from tablets as Intel enters that business.
In the smartphone market, Intel customers are shipping seven devices in 20 countries using the company’s 32-nanometer Medfield SoC, which Otellini said were competitive with “the best ARM designs” in performance and battery life. Intel’s 22-nanometer process with tri-gate transistor technology comprised more than half of company volume in Q4 while “the rest of the industry works to ship its very first tri-gate designs,” he said. Later this year Intel will deliver the industry’s first 22-nanometer tablet and smartphone SoCs to OEMs, Otellini said, and the company will begin the transition to a 14-nanometer process by year end.
On future trends, Otellini said phones are betting bigger, referring to “phablets” coming in six- and seven-inch screen sizes. Tablets, meanwhile, are downsizing to seven inches from 10 inches, he said. The mobile market will “bifurcate” between the five-seven-inch size and the 10-plus inch segment, he said. The larger sizes, “particularly as you get to 12-13 inches, are going to be more classic PC-level of performance,” he said, and are likely to be convertible devices enabled by the company’s upcoming Haswell and Broadwell processors that enable thinner form factors.
Regarding notebook pricing trends, Smith said consumers will buy based on their needs within current price points, which he thinks have bottomed out. “It is very difficult for me to see them going from $299 to $99,” he said. “The bill of materials just doesn’t support it.” Q4 purchase patterns for Windows 8 touch-enabled products showed that people were “willing to spend a little bit more to get a more capable product,” he said, citing the Apple model, calling it “getting paid for innovation.”
Intel’s 2013 forecast calls for revenue growth in the low single digits. FBR Capital Research called the projections “somewhat brow-raising” since achieving that revenue growth would require a better than typical second-half 2013 amid a climate of cannibalization of PCs by smartphones and tablets. Intel shares closed down 6.3 percent to $21.25 late Friday.