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Analysts reduce profit predictions for Intel on weakening notebook market

Notebook computers are becoming the majority of computer system sales for many computer makers. With notebooks being such a large portion of sales a decline in notebook shipments and overall weakness in the segment can put a significant strain not only on the computer maker, but on chipmakers as well.

Reuters reports that the poor global economy is starting to be felt by chipmakers. Notebook makers and component suppliers in the U.S. and Asia are reportedly seeing declining order amounts and outright order cancellations. The orders that are being placed and the machines that are being purchased by consumers are skewing towards the low-end, low-cost netbook and notebook market.

At first, the netbook was cited by research firm IDC as a savior for the notebook market and was credited with helping to keep the market afloat in the tough economy. It didn’t take long for the realization to set in that the increasing sales of low margin netbooks would eat into the profitability of notebook makers and chipmakers. That reality is now setting in and analysts are changing earnings projections for some of the largest firms in the IT industry.

JoAnne Feeney, a chip analyst with FTN Midwest Securities, told Reuters, "Clearly the economic slowdown is spreading to notebooks and we're seeing it in two ways. One is in lower unit shipments, but also a mixed shift to cheaper units. And that's going to filter down through the semiconductor world."

Feeney says that Q4 shipments for notebook processors are expected to drop 5% to 10% from numbers in Q3. Previously the forecast predicted an increase for Q4 of 10% to 15%. She also expects to see price cuts from Intel as it tries to compete on price with rival AMD. Demand is shifting to lower cost notebooks, which is a market AMD is typically very strong in.

Tristan Gerra, an analyst from the Robert W. Baird firm, cut his earnings forecast for Intel by 2 cents per share to $1.08 and significantly lowered his outlook for Intel in 2009 from 85 cents to 56 cents per share based on weakness in the notebook market.

Gerra said in a research note, "Our checks indicate notebook demand trends have further deteriorated since Intel reduced its 4Q guidance."

Notebook makers in Taiwan are reportedly looking at a massive 20% to 25% decline in shipments for Q4. ThinkEquity's Vijay Rakesh likens low-cost, low-margin netbooks to Frankenstein saying, "[Netbooks are a] big double-whammy. They're lower margin, it's like Frankenstein. You created it, you hate it, but you cannot kill it because that's what selling."

Netbook sales are showing no sign of letting up with the machines holding top spots on sales charts at popular retailers like Amazon. All notebook manufacturers are getting into the netbook market and the products are quickly becoming something of a commodity with shoppers. The performance across the netbook segment is very much the same thanks to the Intel Atom N270 being the de facto standard in the field and limits Microsoft places on the segment to qualify for Windows XP use. One of the few areas that a netbook can set itself apart from the masses is in the quality of its keyboard and battery life.

Despite what notebook makers want, the netbook is certainly here to stay.

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Reality check ?
By armagedon on 12/4/2008 4:45:07 PM , Rating: 2
While i admire the chip companies to push the envelop further and further, they need a reality check. I think we pass a while ago what most people really need in computer power. 4,8,16 cores for Joe Blo is getting ridiculous. It's just about big profits margins. Even the good old, last year, sub-$100 twin cores is more then enough, even to play anything. It's like the cars companies which are in a deep hole by selling their large and overpowered cars and SUVs. The majority of us basically need a small box with 4 wheels to get by. So,i think they are just getting their reality check now.

RE: Reality check ?
By glitchc on 12/4/2008 6:39:49 PM , Rating: 2
That's silly. There's no reason to stop. If the processing power/capacity is there, we will find a way to use it. A faster, cheaper number-cruncher is always useful.

RE: Reality check ?
By cete on 12/4/2008 7:51:14 PM , Rating: 2
Unfortunately, the usual way extra processing power is used these days is running poor quality code.

RE: Reality check ?
By whiskerwill on 12/4/2008 8:41:15 PM , Rating: 4
People have been saying that since the days of the Apple II.

RE: Reality check ?
By grenableu on 12/5/2008 5:01:39 PM , Rating: 2
No kidding. I remember hearing that the 80486 was a bad idea, as "good code" could all run fast enough on a 386.

RE: Reality check ?
By armagedon on 12/4/2008 8:35:04 PM , Rating: 2
i don't contest their usefulness and the need to improve them but the need for you and me to get those zigaflops processors.

RE: Reality check ?
By mindless1 on 12/7/2008 8:51:48 PM , Rating: 2
You've got it backwards. If processing power is there, we will not want technology to give us more performance than we need at the same price, we'll instead want smaller cheaper ways to do the things we actually do.

No, we won't find a way to use it. Right now your system is almost completely idle unless you have F@H or some video encoding task ongoing, you are mostly wasting current technological advances. Granted, you may every now and then do something more demanding but that's not what a ultraportable computer is for and not what most people need out of one.

It was inevitable. Chips are more integrated, fewer of them, higher pixel density displays, better modeling of new designs, more experience making products at low cost. Analysts are pretending they are keen on this but we saw it coming every quarter for years. First it was desktops, then everybody who wasn't poor had a desktop. Then it was laptops, then everybody who wasn't poor and wanted one had it. Now it's netbooks, and next it'll be more integrated PDA/phone hybrids.

The typical notebook will be what we call a netbook today and will sell for $200 within the next few years.

What we won't need is very powerful portable computers except for gaming, otherwise that's all going to be in the cloud.

RE: Reality check ?
By glitchc on 12/12/2008 11:02:42 AM , Rating: 2
I disagree. It's not just about average power. Peak power is a primary driver. Not too long ago, one could not burn and game at the same time on a desktop computer. A more powerful processor certainly helps. Display sizes are increasing. If a video cards were unable to generate sufficient processing power to push the pixels out at an adequate rate (30 fps for reference), the demand for such monitors would never catch on.

The ability to generate more processing power will always be the driver for other trends. The trade-off between speed and efficiency can always be adjusted once you have a "superior" component (superior being defined as a part which has a better power/performance envelop compared to its predecessor).

RE: Reality check ?
By mindless1 on 12/13/2008 3:07:33 AM , Rating: 2
Not at all. This is ridiculous. Maybe 0.01% of buyers care if they can "burn" and game at the same time.

You have no clue about normal PC users.

Further, no, a more powerful processor does very little to "burn" which we might assume means write a DVD or CD. Thanks to DMA, processor load is greatly removed from such activities.

Basically, you not only don't have a clue what you're talking about, you have no clue about the average buyer which (as sales figures prove!) chose the lower spec components in order to save some money.

Get out more, look around, no we don't need to keep pushing processing power because of all subsystems it is the one already ahead of the rest in a financially balanced system.

"Superior" components are a nonsense argument. You ignore that any part can run at lower voltage if speed is reduced and all we have to do is quit pretending that there's some great speed race because there is not! There is no race at all for higher performance until we have the next killer app that actually needs it.

Maybe you were recanting bs about computer gaming? Face facts, the average gamer has a lesser video card than can be had on a $1000 laptop. I mean the average avid, frequent, gamer.

RE: Reality check ?
By glitchc on 12/13/2008 4:04:08 AM , Rating: 2
I merely stated a rather poorly formulated example in a hastily-written post. I was trying to be as general as possible. Let me start over.

The OP I replied to suggested that CPU manufacturers need to stop investigating future process nodes, as there is no current, apparent need for such high-performance processors. I am respectfully disagreeing with that statement.

This is not about "normal" PC users (a poorly-defined term if I ever heard one). What normal means now will not carry even 5 years in future. Normal just 10 years ago was a multi-tasking file system with a start bar to hold multiple application windows. 20 years ago it was a command prompt that let you launch a single application. Fast-forward to the present, and the OS has picked up the ability to manage large amounts of memory, generate a dynamically rendered desktop, seamlessly integrate the search-indexing feature without negatively affecting user responsivity. Virtualization of multiple operating systems is now possible at near-usable speeds.

As you push the envelope of hardware, features considered extraneous or "luxuries" before (who didn't shut off Active Desktop on a P133?), become integrated as necessary features into the OS. Now, we may quibble over how many of those features are useful, but I'm sure we both agree that certain features (indexing) are now largely indispensable. Richer interaction with your virtual environment such as multi-touch, multi-media interaction with friends/family on MSN, being a few future examples. Just because we cannot think of it right now does not mean it cannot be done in the future.

To summarize, normal is an evolving standard tied strictly to current computational capabilities.

The videocard example alluded to large processing requirements attached to decode/decompression of high-definition media (at an acceptable framerate). Want to try decoding your nice XVid 1080p home video on a PII 400? What happens when we move to HD x2 or HD x4? Still want to use that Core 2 for an 8MP video stream at 30 fps?

The average user never has to buy the best of the best, but each new process node provides a range of options at various price points. The process node transition is a sunk cost. Delivering lower performance chips does not cost the company any extra money in terms of R&D.

As you said, a new architecture does not necessarily have to be faster, it can also be more efficient. Efficiency can have many meanings, however. Lower clock frequency, lower core voltage, more equivalent instructions executed per cycle (all compared to the predecessor of course). Having said that, there is always a speed race. There is no "fast enough". There are countless problems out there which are still currently computationally prohibitive (ex: stereo correspondence), and would benefit from faster processors. On the other hand, countless others have been trivialized due to advances in computational ability (ex: chess).

There should be no limits, no ceiling on how much computational ability one can achieve. Software will always find a way to fill the gap. It always has in the past, and will continue to do so. Note that none of this argues in favour of or against any specific architecture. This is a generic statement on computational ability, and why research should continue on it at full-speed.

RE: Reality check ?
By ET on 12/4/2008 7:30:15 PM , Rating: 2
I agree. It's been less necessary in recent years to upgrade. I've been upgrading less in the past few years than in the 90's, and I'm a tech fan. I recommend low end PC's to people because few people need more than that. For the most common tasks -- web/e-mail, text processing, photo manangement, casual games -- there's not a real need for a high end, or even mid-range, PC.

(I think that the analogy to cars is fine but the details are wrong. Even the Japanese car industry is in trouble, and they're selling a lot of smaller cars. My guess is that like PC's, current cars need to be replaced less than before.)

RE: Reality check ?
By drebo on 12/5/2008 2:07:40 AM , Rating: 2
There definitely is still a market for high end PCs, though.

I just did several $7000 PCs for engineering use. Look at it this way...if it currently takes an engineer 10 minutes to render a 3d drawing of a truck or the schematics of a city block-sized building and rotate/zoom it or something of that nature and I can cut that down to 5 minutes, that's a 50% increase in productivity. The engineer's time is worth far, far more than a $7000 PC.

In the home, yes, I would agree that the need for a PC over the $1200 price range is gone. However, home users still are not representative of a majority of PC users. The majority of PC sales are still to businesses, and businesses WILL pay extra to reduce downtime. Yes, the HP servers and workstations I sell would cost less if I built them myself with comparable parts. However, my customers enjoy knowing that if they have a problem with one of their systems, HP will send a tech out to their office to repair the issue in 24 hours if it's a workstation or 4 hours if it's a server. That piece of mind and the uptime benefits that it brings is worth the extra $100-$200 in the cost of the PC.

RE: Reality check ?
By mindless1 on 12/7/2008 9:02:36 PM , Rating: 2
That's not a PC, that's a workstation.

In the home, the need for a PC over $500 is gone for 90% of the users. Home users are MORE demanding than the majority of (office) PC users who don't do so much multimedia or heavy multitasking.

Businesses will pay to reduce downtime but there is dwinding evidence that paying more for a PC has that result so long as it's not a generic clone box. On the contrary this isn't reflected in cost of a PC anymore so much as service contracts. Even if it costs $200 more per PC, that'd make it a $600 PC since a $500 PC would be one with endowments wasted in most office use.

That's not to dismiss the need for higher spec machines when it's tied to productivity but that is the minority of PC sales. The typical business system uses a standard OS and apps deployment, centralized account management and server, can be replaced with a spare in the amount of time it takes to fetch it from the storage room so when the HP tech comes on site nobody is waiting for the system to be fixed, they're already using it's replacement and the fixed system is rotated into the spares pool.

RE: Reality check ?
By Aloonatic on 12/5/2008 3:13:32 AM , Rating: 2
I'm still using my Northwood 2.53 GHz P4.

Sure, it sometimes takes longer to load a web browser than it does for my girlfriend's year old cheap laptop takes to boot (vista) from cold, log in and load her browser, but that doesn't really take all that long.

Maybe I'm not in so much of a rush as I'm from a generation who grew up with tape loaded programs where you set a game loading and went off to have you dinner and even then you weren't 100% certain that it would have loaded properly by the time you got back.

The main point about CPU power I wanted to make however was this.

We have reached the same point with PCs as we did with cars a fair while back.

Sure, you can buy a high end machine in both PC & car markets that have massive amounts of power that will rarely be used but the reason that you are spending that money isn't because you need to render or get from A to B at 220 MPH (even if was legal) but to let everyone know that you have loads of money *waves wig wad of cash in the air

Most people have realised that all they need in a car is something with enough power to get them to where they need to go and do what they need to do whilst having enough storage space to fit in their families needs.

They have realised (or are just now realising) the same thing is true of PCs.

Homework, e-mail, eBay and such can be carried out easily on an entry level computer for a very reasonable price.

Games can be played on-line on your xBox or PS3 for the price of a good graphics card alone.

But even if you want to play games on your PC and do some transcoding then you don't need a faster PC, you need a better graphics card.

Lay down that £150 or so, and you are away.

Hopefully the PCIe slot will be with us for some time and the PC that you have now will be with you for a long long time.

RE: Reality check ?
By Penti on 12/5/2008 10:50:47 AM , Rating: 2
You have always got by with a entry level PC for web surfing and office work (word processing), low spec stuff works fine for that.

This is however rapidly changing in todays world, now it is not only games and professional software that demands more. Flash is becoming really heavy and high resolution video decoding really demands more. Programs use loads of memory today. Video editing relies more and more on GPU for acceleration. You can't really get by with a graphics card that does 2D okay any more. So you can't really compare it with cars as roads aren't getting more demanding to drive on. Sure this was true ten years ago too when I used a MPEG2 acceleration card to watch DVDs but that PC could still do some basic OpenGL and software rending where still fine back then. No websites choked the PC, flash weren't for watching movies back then and it did the vector stuff/games fine, realplayer ran fine all bight at lousy quality in the modem days.

Gaming PCs have been pretty cheap for years now all of the 2000' at least. But I would count the last years of the 90's too.

RE: Reality check ?
By Aloonatic on 12/5/2008 11:56:07 AM , Rating: 2
There's always been a lingering sense of "this could be a lot better" when using entry level machines in the past, hell even some pretty high end machines too.

Entry level machines have reached the stage where people are quite happy with what they have got, and this goes for the software and OS that they use too.

Just look at the reluctance that many people have to move over to Vista.

They just don't see the point, as the machine they have at the moment does most of what they need simply and easily and they are happy with the office suites that are relatively cheaply available too.

There has been a change in people's mindsets in recent years.

Before the advice when buying a PC was always "buy as good a PC as you can afford".

Now it's "you'll be fine with a xyz".

If you want to game you are far better off spending your ££/$$ on a graphics card than a new processor and probably a new mother board too.

CPUs are rapidly becoming the side show to GPUs.

The GPU seems to have the whip hand now, for the majority of people that is.

CPUs are more desirable for the amount of (electrical) power that they don't use rather than the (computing) power that they produce, for the everyday common non home built PC man.

RE: Reality check ?
By Penti on 12/7/2008 9:44:24 AM , Rating: 2
I agree that things are moving slower now. But honestly people don't upgrade there OSs, that's just people who run warez and doesn't even has a oem-copy. They get Vista when they buy a new computer. Unless it's a business-computer with Vista Business they won't even have downgrade rights.

But it's been like this all of the 21th century basically. Graphic cards has been important since the Voodoo 2-cards and RIVA TNT. And by that time you could build cheap PCs with like 440BX and a cheap Celeron. The age of expensive all on one packages was over by then. Most mid-range packages is still "it could be better" as a faster GPU could have done so much for the machine. Especially today when ordinary people are starting to use large high-resolution screens. So it's only good if people start to realize that the GPU counts, after ten years of doing so. A good graphics card still means buying a more expensive OEM-PC thankfully now days you can say buy a gamer pc if you would like to game. You couldn't ten years ago.

RE: Reality check ?
By mindless1 on 12/7/2008 9:07:55 PM , Rating: 3
This is mostly nonsense. I'll estimate the number of people using laptops who encode video using GPU processing is less than 0.1% of the population.

No, we are not slaves to some arbitrary thing you think we need to be able to do, will instead upgrade or chose higher spec systems when that is actually true. The market says the opposite, that lowest end systems are more than enough.

Even a 2.5GHz P4 is more than enough, it has nothing to do with the age of the system that a browser loads slow, that's just a misconfigured, overcluttered, or poor broadband situation. Running XP even an old Via C3 system the browser loads within a half dozen seconds, and that's Firefox, IE being already half loaded from it's OS integration takes half that.

amazing profit margins
By Dreifort on 12/4/2008 2:08:08 PM , Rating: 4
Has anyone notice computer prices over the past few years? or even decades?

Working in the industry gives me a front row seat. Last Christmas season, laptops were going for a price range of: $599 was dirt cheap and $2000 was a really nice machine.

This season, dirt cheap is $299 and fully loaded laptops are $1400.

That's a huge drop in price. Meanwhile gas went from $2.50 to $4 in a year (until recent drops back down to $1.80). Food and consumable prices shot way up over the past year as electronics fell dramatically.

Are these companies really losing money to keep sales by dropping prices or was the profit margin so high on electronics (individual parts) so high they have trimmed them to make computers more affordable?

I know a yr ago, a retail store made 10% or less profit on laptops. This year that margin has shrunk to 5% with most stores having sale prices below their profit margin in hopes of attachment sales... so they are losing money on most laptops sold this season.

RE: amazing profit margins
By masher2 on 12/4/2008 2:39:39 PM , Rating: 4
Are these companies really losing money to keep sales by dropping prices or was the profit margin so high on electronics (individual parts) so high they have trimmed them to make computers more affordable?
While there's a bit of both in the recent drop, the real driver is simply Murphy's Law. At one time, an entry-level PC ran over $5K . . . and some manufacturers went broke trying to sell them that cheap.

Eventually, I think you'll be able to get an entire PC on a thumb drive for about $25 -- plug it into any monitor, and instantly convert it into a desktop.

RE: amazing profit margins
By Desslok on 12/4/08, Rating: -1
RE: amazing profit margins
By Dreifort on 12/4/2008 3:30:39 PM , Rating: 4
you'll have to get the upgrade model. The Intel Thumb Atom with the GeForce 1500m (m is for micro) with 512MB DDR3.

And using the new HP 25.5" LCD monitor with the 15 in 1 card'll be able to put your friends (or enemies) faces onto the Crysis characters... or your own face with the built in Webcam.

RE: amazing profit margins
By b534202 on 12/4/2008 5:23:42 PM , Rating: 2
When it gets to that size we'll be implanting computers into our bodies, forget the monitor.

RE: amazing profit margins
By Omega215D on 12/5/2008 2:46:43 AM , Rating: 2
PC on a thumb drive? You've been spying on Asus and their plans on the future Eee desktop PC haven't you?

Apple should really update their Mac Mini lineup with better integrated graphics and lower the price a bit.

RE: amazing profit margins
By ET on 12/4/2008 7:38:01 PM , Rating: 2
IIRC laptops on last year's Black Friday were cheaper than this year (also in the $299 range). There were fewer great deals this year, from what I saw. And $1400 got you a really nice Dell laptop last year, too. A similarly configured laptop costs about the same currently.

In the long term, you're right, prices of PC's have dropped over the past few years.

RE: amazing profit margins
By StevoLincolnite on 12/4/2008 10:32:55 PM , Rating: 3
PC Prices have always been on a steady decline.

Back in the Pentium/Pentium 2 era it was rather easy to spend 3 thousand bucks on a low-end machine, 2 and a half grand if you got a cheap Cyrix or AMD K6, I remember the first iterations of the net books back then with the "Monochrome" LCD screens, running Windows CE and they sold for a good 2 grand as well, for a good equipped machine with a Pentium 2 300, 128mb of ram, DVD Drive with a dedicated "DVD Accelerator", Sound Blaster and a Voodoo 2/3 would easily push you near the 5 grand mark.

When it was the Coppermine vs The Athlon the competition frequently brought around "Price Drops" - because the chips were incredibly competitive.

When the Athlon XP came along prices seemed to plummet thanks to the competition AMD provided at the time against the Pentium 4, Prices then continued to plummet considerably when the Athlon 64 X2 arrived, now the reverse is true for the Phenom.

RE: amazing profit margins
By Penti on 12/5/2008 10:17:36 AM , Rating: 2
Actually I have noticed a price bump with new models that where released with/because GM45/PM45 and nVidia 9400M G. So higher end costs much more now then a few months ago, before you could buy a pretty cheap laptop with the newest chipsets available. So you actually pay hundreds of dollars more for a nice machine now.

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