April 23, 2024

Intel Cuts Outlook on Weak PC Demand; Shares Slump

Intel also said it was scaling back capital spending as a result of the business slowdown. Intel’s stock was down 3.7 percent on Friday afternoon, and shares of ASML Holding NV and other companies that make chip-manufacturing equipment also lost ground.

A revision of Intel targets had been expected by some analysts after PC makers Hewlett Packard Co and Dell Inc warned of slow demand last month, a development that has been compounded by a shaky global economy and consumers shifting toward tablets and smartphones.

But the 8 percent reduction in the top chipmaker’s revenue outlook was much more severe than expected. Intel also withdrew its full-year forecast.

The scaled-back outlook comes just days ahead of a major event where Intel will tout a new generation of processors that consume less power, central to its strategy of reinvigorating a stagnant PC industry.

Bernstein analyst Stacy Rasgon said the size of the Intel cut was surprising. Weakness in PC sales to businesses and governments, known as enterprise sales, cited by Intel also raised concerns.

“In the last six to eight quarters, consumers have been weak but the enterprise was strong. Now the enterprise is weak,” Rasgon said.


Intel’s warning comes at a time when PC makers should be gearing up to build more computers than usual ahead of the launch of Microsoft Corp’s Windows Phone 8 operating system.

Intel has been banking on the Windows 8 release in October to help slow the trend of consumers buying smartphones and tablets instead of PCs.

Devices running Windows 8 and powered by Intel’s latest components will be a major draw when thousands of technology professionals descend on the annual Intel Developer Forum in San Francisco next week.

While a Windows release normally boosts computer sales, analysts believe it might not help as much this time.

At the forum, Intel is expected to show off a range of Ultrabook laptops powered by recently launched Ivy Bridge processors, as well as hybrid devices with screens that detach from keyboards to be used as tablets.

Along with concerns about consumer demand being hurt by the weak economy, manufacturers are reluctant to commit their resources until they have a better idea of which kinds of new devices will become hits with consumers.

“You’re trying to decide are people going to buy … a tablet that slots into a keyboard, or are they going buy traditional notebooks or ultrabooks?” said MKM Partners analyst Daniel Berenbaum.

“In the absence of knowing what to sell, there’s a clear reluctance to build any sort of further inventory.”


Intel’s next-generation PC processor, code-named Haswell, will also be front-and-center at the forum, with executives talking up improved power performance that will let future laptops stay on longer without needing a recharge.

Haswell, due to appear in a crop of laptops released for next year’s holiday season, will improve on computing and graphics features and is targeted to reduce electricity consumption from 17 watts to 10 watts, according to Intel.

Intel said it now expects third-quarter revenue of $13.2 billion, plus or minus $300 million, down from its previous forecast of $13.8 billion to $14.8 billion.

Analysts on average expected $14.2 billion. The company is due to report third-quarter results in October.

Intel processors are used in 80 percent of the world’s PCs, but the Santa Clara, California, company has been slow to adapt chips for smartphones and tablets and now trails Qualcomm Inc and Samsung Electronics Co Ltd, which design their chips using power-efficient technology licensed from ARM Holdings Plc.

Intel’s new Medfield processor, showcased in phones launched this year in Russia, India and the United Kingdom, surprised some critics who believed the chips would consume too much power.

Motorola Mobility, owned by Google Inc, is expected to unveil an Intel-based smartphone in London on September 18, the first of a multi-device agreement with the chipmaker.

“They have a respectable seat at the (mobile) table because they surprised a lot of people with Medfield and just how well that did perform,” said Patrick Moorhead of Moor Insights Strategy. “Their big chance to get more credibility will come with Motorola.”

The company said on Friday that full-year capital spending is expected to fall short of its previous forecast of $12.1 billion to $12.9 billion.

It expects gross margin of 62 percent for the third quarter, plus or minus 1 percentage point, down from its previous expectation of 63 percent, plus or minus a couple of percentage points.

Intel shares were down 3.7 percent at $24.16 on Friday afternoon. AMD was off 4.9 percent at $3.48. PC graphics chipmaker Nvidia Corp was down 1.9 percent at $13.47.

ASML’s Nasdaq-traded shares were down 1.7 percent at $56.88, and stock of chip gear maker Applied Materials Inc was down 0.7 percent at $11.83.

(Reporting by Sayantani Ghosh in Bangalore, Sinead Carew and Nicola Leske in New York; editing by Saumyadeb Chakrabarty, John Wallace and Matthew Lewis)

Article source: http://www.nytimes.com/reuters/2012/09/07/technology/07reuters-intel-outlook.html?partner=rss&emc=rss

Oracle’s Profit Rises, but Weak Hardware Sales Are Worrisome

Oracle said computer sales in its fourth quarter, which ended May 31, declined 6 percent to $1.2 billion compared with the same quarter a year earlier. When services are added in, the company’s hardware revenue was flat, at $1.8 billion.

Oracle has cast hardware as an important part of its future and the poor showing raised fears that the $7.4 billion acquisition of Sun was failing to live up to its billing.

Oracle’s shares fell more than 4 percent in after-hours trading. Investors have long been suspicious about Oracle being able to turn around the Sun server business, which struggled before the acquisition was completed in late January.

Oracle’s fourth quarter was the first time investors were able to see a full year-over-year comparison of that segment under Oracle’s ownership.

Brendan Barnicle, an analyst with Pacific Crest Securities, said the underwhelming results from the hardware business were not too worrisome. The hardware results, however, were still far lower than the company had forecast, he said.

“They identified this early on that they would rationalize the Sun business,” Mr. Barnicle said. “It takes a while to do, but all of us hoped that it would be done by now.”

Oracle’s executives emphatically dismissed the idea that hardware sales were suffering. They instead cast the decline as part of deliberate strategy to pare back unprofitable sales. Two Sun policies, the resale of other companies’ products and the sale of lower-cost servers, are not Oracle’s strategy, said Mark V. Hurd, Oracle’s co-president.

“I just think we are following the fundamentals of building a solid business,” he said in a conference call. He described the lost revenue as “valueless.”

Oracle’s profit nonetheless beat expectations. Excluding certain one-time costs, earnings were 75 cents a share; analysts had expected 71 cents a share, according to a survey by Thomson Reuters.

Oracle reported that overall net income in the fourth quarter rose 36 percent, to $3.2 billion, or 62 cents a share, from $2.4 billion, or 46 cents, in the quarter a year ago.

The company said revenue climbed 13 percent to $10.8 billion, from $9.5 billion. Analysts had expected revenue of $10.75 billion.

The decline in hardware sales was more than made up for by increases in Oracle’s main software business. New software license revenue, a critical measure of the company’s business because it brings recurring future revenue, grew 19 percent to $3.7 billion.

Executives also bragged about Exadata, a newer initiative to sell software bundled with servers to large corporations. More than 1,000 Exadata machines are installed worldwide, Oracle said, and the goal in the current fiscal year is to triple that number.

Oracle estimated that its first quarter revenue would rise 10 to 13 percent, which falls within analysts’ expectations. Adjusted income is expected to be 45 to 48 cents a share, also in line with the average estimate of 46 cents by analysts.

Article source: http://feeds.nytimes.com/click.phdo?i=e92d7c1ae982bec6ffbfe684dcc8551c