Intel Profits Fall as PC Slump Cuts Demand for Chips

The earnings decline points to the challenges facing the big chip maker as it struggles to make the transition beyond its lucrative stronghold as the leading supplier of the chips that power PCs.

As people do more and more of their computing on tablets and smartphones, personal computer sales are falling.

The company reported net income to $2.05 billion, a decline of 25 percent from $2.74 billion in the period a year earlier.

Intel’s earnings fell to 40 cents a share, compared with 53 cents a share a year ago. The quarter’s performance was just below Wall Street’s average estimate of 41 cents a share, as compiled by Thomson Reuters.

Revenue in the first quarter slipped to $12.58 billion, down from $12.91 billion in the first quarter of 2012. That was in line with analysts’ forecast of $12.6 billion.

In after-hours trading, Intel shares were flat. In the regular trading session, the company’s shares added 54 cents a share, or 2.5 percent, to close at $21.92.

In a conference call to discuss the results, Intel executives were more optimistic about the rest of the year.

Stacy J. Smith, the chief financial officer, said the company should return to growth in the second half, and probably achieve “double-digit revenue growth for the year.”

An improving economy should help, as well as new products like its Haswell chips, a power-saving processor that supports touch-screen computing on ultrabook computers, which are hybrids of notebooks and tablets.

Haswell chips, Mr. Smith said, will be in products that will begin to ship this quarter.

A year ago, Intel was not positioned to follow demand into higher-growing markets like hybrid and tablet computers, said Paul S. Otellini, the chief executive, who plans to retire in May.

Now it is, he said. “Never before has our ability to compete across the spectrum of computing been greater,” Mr. Otellini said.

Intel’s business of selling high-end chips to power the server computers in data centers is growing. Its data center group reported a 7 percent increase in revenue in the quarter, to $2.6 billion.

But strength elsewhere is not enough to offset Intel’s dependence on the personal computer market.

In 2012, the company’s PC chip division accounted for 64 percent of Intel’s total revenue and 89 percent of its operating income.

Last week, the research firm IDC reported that worldwide personal computer shipments declined by nearly 14 percent in the first quarter of this year, the biggest drop since the research firm began tracking quarterly PC sales in 1994.

Article source: http://www.nytimes.com/2013/04/17/technology/intel-profits-fall-as-pc-slump-cuts-demand-for-chips.html?partner=rss&emc=rss