Intel profits fall as convergence hits PC sales

Wall Street drew a deep breath, and muttered to its collective self when Intel announced that its profits were down 27 percent in the last quarter yesterday evening.

No one expected good news from Intel’s results and everyone had been expecting a dismal fourth quarter.

The company reported  a net income of $2.5 billion, down 27 percent from $3.4 billion, a year earlier. Revenue fell three percent to $13.5 billion from $13.9 billion.

Of course, the New York Times  blamed Intel’s poorer showing on the fact that Apple had killed the PC with its glorious, and mythical mobile revolution. It pinned this view on the fact that the Intel CEO cryptically said that the PC business was evolving and form factors are going to blur.

In fact it is more likely to be the poor economic situation in the key business regions of Europe and North America. The PC technology has not changed much so companies have saved cash by not upgrading.

Intel’s figures were not that bad considering. Net income was higher than analysts expected.

What worried them was that Intel projected lower revenue and pressure on its profit margins for 2013. Many hoped that Intel would say that it expected things to get better.

In the last six months, shares of Intel have fallen about 18 percent.

Intel said it would spend $18.9 billion on research and development, along with marketing and administrative costs, in 2013. This is a significant increase, as two years ago Intel spent $16 billion on those things, increasing that amount to $18.2 billion last year.

This seems to suggest that its strategy is to come up with new products to wow the market.

What is interesting is that Intel’s figures did not appear to have been improved by Microsoft’s release of Windows 8. This is because the software adoption did not require the purchase of new machines. In fact Otellini did not even mention Windows 8, but given responses from retailers to our sister publication Channel Eye we were not surprised.

Otellini talked up Ultrabooks, saying that there were now 140 types of the lightweight laptops on the market. He said that the number of styles and different ways they use things like keyboards and touch screens, he said, would make it harder to tell a PC from a tablet.

This year Intel will introduce a new chip, Haswell, which will help in the production of lightweight machines that have longer battery life.

Intel continued to make money on its server chips, particularly for those in data centres. Fourth-quarter sales to data centres were $2.8 billion, an increase of four percent from a year earlier, Otellini said.