Intel starting to sweat as PC business changes

Chip goliath Intel (INTC) delivered its second quarter financial results yesterday and it is not good news, reading between the lines.

Its revenues amounted to $13.5 billion, with a net profit of $2.8 billion and n the face of it, that’s not bad at all. Except that the quarter was down in profitability by four percent, and it isn’t too confident about its third quarter. The third quarter, traditionally, is boom time for Intel but the X86 game seems to have somewhat changed.

Revenues were up four percent from the same quarter a year ago but in last year’s quarter it made a net profit of $2.95 billion.

Intel blamed Microsoft for slow demand – people seem to be holding off buying notebooks until they see what Windows 8 will deliver.

But Ultrabooks, which it is pinning its hopes on, aren’t widely available plus Intel faces increased competition from tablet machines – mostly Apple and Android. ARM chips dominate the Android market, while Intel’s foray into smartphones have hardly made a dent as phone manufacturers don’t want to be locked in Chipzilla’s fond embrace.

CEO Paul Otellini said that the third quarter looks soft.  The “macroeconomic climate” isn’t conducive to enterprises splashing out on new machines – they prefer to keep their money in the bank.  Intel isn’t splashing out either, it seems.

Otellini said in a prepared statement: “As we enter the third quarter, our growth will be slower than we anticipated…. With a rich mix of Ultrabook and Intel based tablet and phone introductions in the second half, combined with the long term investments we’re making in our product and manufacturing areas, we are well positioned for this year and beyond”.

The jury is still out on that bullish statement.