Intel's Q3 Revenue, Earnings Flat As Data Center Growth Meets PC Decline


Intel on Tuesday reported a drop in revenue and flat income for its third quarter 2013 compared to last year, with a fast-growing data center business nearly overcoming a drag in the company's PC and client business.

Growth in Intel's embedded systems and NAND memory revenue over last year also pointed to a significant shift in focus away from the PC and client business, which has been slowly dropping on an industry-wide basis.

"Year-to-year PC CPU volume declined and slowed, but were offset by data center sales," said Brian Krzanich, who in May took over as CEO for the company

[Related: PC Market Beats Expectations But Still Down, IDC Says]

The Intel results make sense given the changes going on in the IT industry, said Todd Swank, senior director of product marketing at Equus Computer Systems, a Minneapolis-based system builder.

"Channel-wise, the data center business seems to be the best fit going forward," Swank said. "There's lots of competition in the mobile and PC market, but lots of opportunities for the server business. We have already aligned our business accordingly, so we feel Intel is going in the right direction."

For the third fiscal quarter of 2013, which ended Sept. 28, Intel reported revenue of $13.5 billion, which was flat compared to the third fiscal quarter of 2012.

Intel reported net income for the quarter of $3.0 billion, or 58 cents per share, which was also flat compared to last year.

The news was in the details, however.

Intel's total Data Center Group revenue reached $2.9 billion in the quarter, up 12 percent over last year. However, its PC Client Group revenue, reported at $8.4 billion, was down 3.5 percent from last year.

Krzanich, during his prepared remarks for Intel's third-quarter analyst call, said Intel's cloud revenue rose 40 percent over last year, while its storage revenue rose 20 percent, HPC (high performance computing) revenue rose 27 percent, embedded revenue rose 21 percent, and NAND memory revenue rose 20 percent.

Stacy Smith, Intel executive vice president, CFO and director of corporate strategy, said in response to an analyst's question that Intel's server business growth is expected to accelerate in the fourth quarter.

"And that will be significantly above the corporate average," Smith said.

Krzanich said Intel is moving to increase its mobile business as the client business goes increasingly mobile. For instance, he said he expects eight to 10 tablet PCs based on Intel's Big Trail mobile chip to be available by Black Friday, although he admitted that it was a little less than originally anticipated.

Intel has already introduced its first-generation LTE technology, and it has plans to introduce VoIP on LTE in the first quarter of 2014 and second-generation LTE in the first half of 2014, Krzanich said.

PUBLISHED OCT. 15, 2013