Today Intel [NASDAQ:INTC]
reported their earnings for the second calendar quarter of 2013, ending June 29th. In 2Q 2013, Intel reported profits of $2.0 billion on $12.8 billion in revenues. This translates to an EPS of $0.39 which hits the lowered mark that most analysts were expecting. However, Intel missed the mark on their revenue, as many were expecting $12.9 billion in revenue, which translates to better than expected margins. However, things do not necessarily look too great relative to the same period a year ago, when Intel was pulling in $2.83 billion. They also lowered their forecasts for the rest of calendar 2013, resulting in flat revenues when compared to next year.
Many analysts will likely chalk this up to a numerous amount of factors primarily led by the fact that the 'PC is dying' which I believe to be a horrendous and drastically incorrect assessment. But rather the fact that our traditional understanding of what a PC has been is dying. To me, our smartphones are more personal computers than our current desktops and laptops. We spend more time in front of our smartphones and tablets than we do any other electronic device, so really, this is a reflection of Intel's poor performance in smartphones and tablets. Yes, they're improving, but they're nowhere near competitive yet. Things may likely change with Bay Trail and actually help Intel move forward with their mobile products.
The traditional desktop is becoming more of a niche poweruser device. The truth of the matter is that it will be hard to beat the speed and momentum of the desktop PC market and there will still be a lot of users that will demand it. However, Intel's bread and butter mid-range and low-end products are getting cannibalized by tablets and smartphones. Smartphones and cheap tablets are cannibalizing their low-end of their business while convertible tablets are hurting their laptop business and I'm not convinced that Ultrabooks are going to last very long. I think Intel spent far too much time and money trying to push Ultrabooks when in convertible reality tablets will likely deliver similar performance (the bare minimum needed for a good experience) and better battery life.
With Intel's new CEO
being a chip guy with fab experience, I expect Intel to start to sell some of their fab capacity in order to remain profitable. Nobody is going to hold it against them if they need to fab things to keep their costs down, sure, it'll hurt their pride or egos, but they need to do it. I believe that they simply have too much capacity right now and not enough demand. Until they can really draw up some serious mobile SoC demand for their chips, I just don't see them filling their fabs.
Intel also needs to seriously fill their CTO position
, quickly, because the CTO is going to help the new CEO make a lot of product decisions and make sure that Intel's technologies are moving in the right direction. Right now is clearly a changing phase for Intel for a whole host of reasons and it will be interesting to see how the company changes over the course of the next 18 months. Oh, and we still have to see whether or not they can pull off this TV deal or not.
Currently, Intel's lowered forecast and lower earnings are affecting the stock as it is currently down 3.5%
in after hours trading.
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