Analysis: What Intel, AMD Are Saying About The PC Market

Intel and AMD reported their fourth-quarter and full-year financials within days of each other, and both companies cited weak PC demand.

What do they expect for 2013? Intel and AMD executives each had slightly different perspectives on the PC market, but there were some telling comments made during their respective earnings calls.

As far as weak PC demand, Intel CEO Paul Otellini made a couple of remarks that tied slumping PC sales to a weak world economy. "This was in an environment of relatively soft PC demand and weak macro-economic conditions," said Otellini during the company's fourth-quarter earnings call.

Intel CFO Stacy Smith echoed that sentiment. "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.

[Related: Windows Growth Solid For Microsoft, But 4Q Profits Fall ]

Tablets were a topic of conversation on Intel's earnings call as well. Otellini talked about 2012 being a period of "significant transitions" for the PC market but remained upbeat overall about the potential impact of tablets going forward.

"PC manufacturers are embracing innovation as we are in the midst of a radical transformation of the computing experience with the blurring of form factors and the adoption of new interfaces," he said. "It's no longer necessary to choose between a PC and tablet. Convertibles and detachables, combined with Windows 8 and touch, provide a two-for-one, no-compromise computing experience."

Otellini also said performance requirements for new tablets are going to be in the same range as those of recent PCs. "As we look forward, it's very difficult to distinguish between a detachable clamshell notebook and a tablet. The form factors are going to blur here," he said.

As for the company's outlook on PCs, Smith said Intel, Santa Clara, Calif., has "pretty modest expectations around units" for the PC Client Group. However, he said he expects that modest growth to come from "devices that sit in the middle" such as convertible notebooks and tablets rather than desktops and traditional laptops.

With the recent news that Intel will cease its motherboard manufacturing operations by 2016, it's clear Intel sees the desktop PC as not just a shrinking business but as an endangered species going forward.

NEXT: AMD's Outlook For The PC Market

AMD had a similar outlook on the PC market in 2012. AMD CEO Rory Read also connected weak PC demand not to a shift in form factors or mobile devices but to the overall world economy. "Full-year results fell short of our expectations, as a challenging macro-economic environment resulted in a weaker-than-expected PC market," Read said during AMD's fourth-quarter earnings call. "We expect continued choppiness in the PC market in the first half of 2013."

New AMD CFO Devinder Kumar also cited the world economy rather than tablets as the primary obstacle for the PC market in 2012. "Broader macro-economic issues impacted consumer PC spend in the second half of 2012," Kumar said.

But there were some encouraging -- albeit very small -- signs for AMD's PC business. Read said sales of AMD-based notebooks grew year-over-year on Black Friday, although he didn't specify by how much. Plus, Read said, "nearly one in every three notebooks sold in retail in the fourth quarter were powered by AMD."

So while notebooks were somewhat strong for AMD, there were some positive developments for desktops, too. Lisa Su, senior vice president and general manager of AMD's Global Business Units, highlighted two of the company's higher-performance desktop chips.

"I think we saw some positives and some negatives in the desktop business," Su said. "We did see an increase in desktop ASP, primarily because we introduced our higher-end Athlon FX series as well as the new A-Series Trinity APUs into the channel, and that drove ASPs up a little bit on the desktop side."

Then there's the additional insight provided by AMD's graphics business, which fell 15 percent year over year (compared to an 11 percent decrease in AMD's Computing Solutions business). The steeper decline in graphics revenue could be attributed to the weaker demand for desktop PCs, as most desktop systems with discrete graphics tend to have significantly higher price points than those systems with integrated graphics.

Read said AMD saw record graphics revenue in the fourth quarter from workstations and high-end gaming PCs. In addition, he said unit shipments and revenue for high-end Radeon graphics grew in the quarter and helped boost overall ASPs. Essentially, AMD is saying its higher-end desktop PC business is doing well and it sees that as a key business area. However, lower-end and midrange desktops are evidently a shrinking business for AMD.

As for tablets, AMD is making the market a priority in 2013. The Sunnyvale, Calif.-based chip maker said it has big expectations for its new high-performance tablet processor, code-named Temash, and it highlighted a new customer win in Vizio, which will be releasing two AMD-based touch-screen ultrathin notebooks as well as a Windows 8 tablet. Read said he expects a "dynamic" PC market in 2013 with weak demand in the first two quarters but improvement in the second half of the year. "That market is going to continue to be choppy in 2013, particularly in the first half," he said. "We expect the second half to be stronger than the first half from my perspective."

PUBLISHED JAN. 25, 2013