Intel Bullish on Second-Half Outlook For Haswell-Based PCs
Touch-enabled Ultrabook pricing could fall to $499 during the holiday season, with $599 “pretty commonly out there,” said Intel Chief Financial Officer Stacy Smith on a Q1 earnings call. Thin notebooks, powered by Intel’s Bay Trail processors, will hit $300 price tags come Christmas season while some ultrathin and light notebooks based on non-core processors could reach as low as $200, according to outgoing CEO Paul Otellini.
Sign up for a free preview to unlock the rest of this article
Timely, relevant coverage of court proceedings and agency rulings involving tariffs, classification, valuation, origin and antidumping and countervailing duties. Each day, Trade Law Daily subscribers receive a daily headline email, in-depth PDF edition and access to all relevant documents via our trade law source document library and website.
As OEMs start looking at new designs to build around new Intel chips -- including Haswell, Bay Trail, and Windows 8 -- there will be an “explosion in form factors” leading to platform competition that will drive prices down to the $300 to $400 range -- with touch, Otellini said. Going into the “prime selling season,” hardware vendors will be offering new products, new technologies, new form factors, and new capabilities that, “up to now, were unapproachable price points,” he said.
Intel continues to promote the Haswell processor, set for a June launch, as a growth driver for PC sales in the second half. The combination of an “improving macroeconomic environment,” Haswell’s imminent arrival, smaller form factors -- including Ultrabooks, convertibles and tablets -- and touch-enabled devices “leads to a return to growth in the second half of the year,” Smith predicted.
Intel net income of $2 billion in Q1 dropped 25 percent from Q1 2012 on $12.6 billion revenue, down 3 percent from Q1 2012, Smith said. The PC Client Group posted revenue of $8 billion, a 7 percent decline from Q4 and 6 percent decline year over year, Smith said. Desktop platform revenue fell 7 percent from Q1 2012, while desktop platform average selling prices rose 5 percent year over year, Smith said. In notebooks, revenue dropped 6 percent and notebook platform average selling price slipped 2 percent, he said.
For Q2, Intel is forecasting revenue of $12.9 billion, “slightly higher” than the average season increase, Smith said, on expected “pipeline inventory replenishment” following the Haswell launch and “anticipation of a stronger second half,” he said. The company predicted a “low single-digit” revenue increase for the year, matching prior expectations, it said.
Intel took a “higher than anticipated inventory write-off” on older generation technologies as a result of increased demand for Haswell products prior to qualification for sale, the company said. The worldwide PC supply chain saw a continued drop in inventory levels in Q1 as customers reduced inventory of older generation PCs ahead of the Haswell launch, Smith said. Intel inventories shrank by almost $400 million from Q4, Smith said, and gross margin of 56 percent was down 2 percentage points from earlier expectations. The company is “taking advantage” of excess capacity on older generation process technologies to take shift capacity for upcoming 14 nm technologies “and beyond,” he said. The company lowered its capital spending forecast for the year by $1 billion, to $12 billion, he said.
Intel shares edged up 2 cents Wednesday, closing at $21.94. Analysts were largely unmoved by results, which FBR Capital Markets analyst Christopher Rolland called “remarkably uneventful.” Other analysts referred to Intel Q1 earnings as “better than feared,” “yawn” and “nothing to cheer about.”
Rolland noted a “growing disconnect” between FBR’s PC market research, data from Gartner and IDC and Intel PC unit sales results, which, he said, could “perhaps be explained by differences in semantics, unaccounted white box builds, and client CPUs used for applications outside of PCs.” For 2013, a “soft” first quarter has resulted in “back-loaded” second half, a “growing risk,” he said. “We remain skeptical,” he said, citing the continued threat of tablets cannibalizing Intel’s core business.