Intel-Based Tablets to Fall Below $150 This Holiday, Says Intel CEO
Intel is predicting “sub-seasonal growth” for Q3, Chief Financial Officer Stacy Smith said on the company’s Q2 earnings call Wednesday, as the company comes off an “OK Q2, but not a gangbuster Q2.” Revenue drivers for the company in Q3 will include Intel’s Haswell System on a Chip (SoC), which he called “a great product for Ultrabooks and two-in-ones,” and Bay Trail, part of the Atom processor family, which will allow Intel to hit price points in the touch-enabled PC segment “that we've never touched before.” Intel will reach consumer price points profitably, and the company will “start hitting share in tablets,” Smith said. An improving macroeconomic climate going into second-half of 2013 will also help drive sales in the second half, he said.
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Atom-based tablets will fall below $150 during the holiday season, Intel CEO Brian Krzanich said on the call. The “solid performance” and longer battery life Bay Trail enables in sub-$300-400 clamshell and touch-enabled convertible, and two-in-one PCs will allow Intel to move into markets it’s currently not in, Krzanich said. Based on the code-named Silvermont architecture, Bay Trail processors deliver a five-times reduction in power at the same level of performance as the company’s previous architecture, he said. Silvermont supports Android and Windows operating systems and is the backbone for tablets, two-in-one PCs and desktops, as well as phones and microservers in Intel’s Data Center cloud storage unit, he said.
On whether Bay Trail could be “so good” that it starts to cannibalize Intel’s higher-performance, more expensive Haswell product, Krzanich said the company views Bay Trail revenue as “expansive.” He said Haswell delivers the “largest battery life improvement in Intel’s history” and will offer fanless operation for the first time, which enables Core-level performance in a tablet without need for a cooling fan. Intel sees a strong demand from tablet and convertible device users for HD video performance and gaming, he said. Haswell enables Intel to “go down into those better price points,” he said, while still delivering processing power consumers are looking for, he said.
Smith said there’s a “big gap” in performance and features between the best of Bay Trail and the Core i3, i5, i7 segment of Intel’s line. Even in a weak market, the Core volumes have been “very healthy,” he said. In addition to taking Intel into segments of the market where Intel doesn’t currently play, Bay Trail will generate more dollars per unit than the company could generate with Celeron or low-end Pentium processors because of Bay Trail’s cost structure, he said.
Krzanich, leading his first earnings call since being named Intel CEO May 2, said, “I understand that we've not always lived up to the standard that we have set for ourselves.” Intel was “slow to respond to the ultra-mobile PC trend,” and that slowness to market has been playing out in market dynamics, he said. “The traditional PC market segment is down from our expectations at the beginning of the year while ultra-mobile devices like tablets are up,” he said.
As it fields several product families going forward, Intel will move Atom “even faster” to its 14-nanometer manufacturing process, Krzanich said. Production will begin later this year and Krzanich referred to earlier projections that 14 nm-based products -- which integrate graphics, communications and other devices in an SoC -- will appear on the market in first-half 2014. The Atom advances don’t mean Intel will “lessen the value or leadership of our Core product family, but rather make Atom an equal player in technology leadership for the ultra-mobile space,” he said. Both product lines will drive Intel’s future, he said.
For the quarter, Intel had revenue of $12.8 billion, down from $13.5 billion in the year-ago quarter, while net income fell to $2 billion from $2.8 billion. PC Client Group revenue of $8.1 billion was up 1.4 percent sequentially and down 7.5 percent year-over-year, the company said. Revenue projections for Q3 are $13.5 billion, plus or minus $500 million, the company said. For the year, Intel scaled back projections of a low single-digit percentage increase to flat year-on-year. Intel shares closed 3.8 percent lower Thursday at $23.24.