Intel in search of new markets as PC sales ebb

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Intel in search of new markets as PC sales ebb

Intel, the world’s largest semiconductor maker, forecasts third-quarter sales that may fall short of some analysts’ estimates as a slump in the personal computer market erodes its largest business.

Revenue in the current period will be $13.5 billion, plus or minus $500 million, the Santa Clara, California-based company said yesterday. Analysts on average had predicted sales of $13.7 billion, according to data compiled by Bloomberg.

The company reported its fourth straight revenue decline in the second quarter as consumers shunned the PCs that provide the company with most of its sales, opting instead for smartphones and tablets to get online. To halt the slide and reignite growth, Intel needs to persuade more phone and tablet makers to start using its processors, said Michael Shinnick, a fund manager at Salt Lake City-based Wasatch Advisors.

“There is no debate that the traditional PC is in secular decline,” said Shinnick, whose firm owns Intel shares because of their ability to generate cash for dividends and share repurchases. “Can they get shares in mobile devices?”

The stock was as low as $23.10 in extended trading following the announcement. It has gained 17 percent this year, compared to a 28 percent advance by the Philadelphia Semiconductor Index.

Based on Intel’s forecast, third-quarter revenue will be little changed from $13.5 billion a year ago.

For 2013, the company said sales will be “approximately flat” compared with last year. That brings it in line with analysts, who on average estimated sales would be $53.5 billion. Intel had projected an annual revenue percentage gain in the low single digits.

Intel expects the macro economy to improve in the second half of the year, bolstering demand for new server chips, said Chief Financial Officer Stacy Smith.

Like market researchers and analysts, Intel doesn’t see traditional PC demand rebounding. Its future growth hinges on how well new products aimed at phones, tablets and smaller computers are received, said Smith.

“You’re going to see the traditional segment falling and you’re going to see some of these new categories growing fast,” he said. “Our product line now spans across all these different devices so we can participate in all of the segments that are growing. For us, it’s really all about the product cycle.”

The company also reduced its budget for new plants and equipment by $1 billion, to a total of $11 billion, plus or minus $500 million.

Meanwhile, Qualcomm, the largest seller of semiconductors for mobile phones, said it’s about to crack the tablet market, further distancing itself from rival Intel in wireless computing.

The company has begun selling upgraded versions of its Snapdragon processor line and anticipates the new chips will appear in 200 phones and tablets, said Raj Talluri, a senior vice president at San Diego-based Qualcomm. He didn’t provide a time frame.

“You’ll see a whole bunch of tablets based on Snapdragon 800 in the market this year,” said Talluri. “There’s a lot of talk about Intel and tablets. Clearly we see them still being far behind in mobile.”

Bloomberg

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