Intel PC Business Down, Data Center Up In Q4


Intel's fourth-quarter earnings saw more bad news for its PC business but improvement for its data center sales.

The world's largest chip maker reported fourth-quarter revenue of $13.5 billion, slightly below analysts' projections. Intel's earnings, meanwhile, fell 26 percent year-over-year to $2.5 billion or 48 cents a share. For the full year, Intel reported revenue of $53.3 billion and earnings of 11 billion or $2.13 per share, which mark a 15 percent drop from 2011.

Beyond the lackluster revenue and earnings, the quarter's financials further reflected Intel shifted from its longtime cash cow of Windows PCs to the data center and newer areas for Intel such as smartphones and tablets. Intel's PC Client Group revenue continued to fall, decreasing 6 percent year-over-year in the fourth quarter to 8.5 billion and falling 3 percent for the full year to $34.3 billion.

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The Data Center Group, meanwhile, increased sales 4 percent to $2.8 billion for the fourth quarter and 6 percent for 2012, reaching $10.7 billion.

"We made tremendous progress across the business in 2012 as we entered the market for smartphones and tablets, worked with our partners to reinvent the PC, and drove continued innovation and growth in the data center," said Intel CEO Paul Otellini in a press statement. "As we enter 2013, our strong product pipeline has us well positioned to bring a new wave of Intel innovations across the spectrum of computing."

Intel had been hoping its new Ultrabook designs, coupled with the release of Windows 8, would help jump-start PC sales this year. But Ultrabooks haven't quite met the lofty expectations set by both Intel and PC manufacturers, and sales for Microsoft's new operating system have been sluggish. In addition, tablet growth put a dent in the company's PC sales, according to Intel CFO Stacy Smith.

"Worldwide GDP growth was significantly less than we had thought entering the year, and the PC market segment was impacted by the growth of tablets," Smith said.

During the conference call Q&A, many questions revolved around Intel's PC business. Smith took exception with one analyst's remark about the PC business declining even more in 2013, arguing that Intel's PC Client Group growth will be generated from "a wider range of devices" than just desktops and notebooks, including Intel-based smartphones, tablets and tablet-laptop hybrid devices.

Smith also said the company expects the Data Center Group to return to double-digit revenue growth this year, which will be driven by growth in cloud computing and more Intel chips in networking and storage hardware.

As for Intel's foundry business, Otellini said Intel doesn't want to be a general-purposed chip manufacturer and will be very selective in choosing customers. According to report from Bloomberg today, Intel will begin manufacturing Cisco-designed chips for the networking giant's switches and routers.

Intel said it expects 2013 revenue growth to be in the low single digits, while first quarter revenue is projected to be around $12.7 billion.

PUBLISHED JAN. 17, 2013