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Intel will likely receive boost in opposite direction once shortage ceases and OEMs rebuild their inventories

Globally, personal computer sales and market demand continues to rise, posting their fourth consecutive quarter of growth.  You'd think Intel Corp. (INTC), the world's largest maker of personal computer central processing units, would be celebrating.  Instead its financial staff are reporting some unpleasant news.

Intel announced yesterday that it was dropping its outlook for fourth-quarter revenue from $14.7B±$500M USD to $13.7B±$300M.  GAAP and non-GAAP gross margins also dropped half a percentage point.  The cuts were due to shrinking microprocessor sales.

It turns out that the recent flooding which ravaged Vietnam, producers of one quarter of the world's hard drives, is still sending shockwaves through the personal computing market.  Hard drive shortages have hit the OEMs hard.  As they can't build computers without hard drives, they've turned to pushing much of their backup inventories onto the market.

wet hard drive

Meanwhile, the OEMs have cut their CPU orders from Intel to lower levels.  Sales won't be restored until the hard drive supply picks up again and the OEMs begin to rebuild their inventories.  

The good news is that Intel could enjoy a very strong H1 2012, the exepcted timeframe where the hard drive market will return to normalcy.  OEMs will be trying to build up their stock, while meeting the growing demand at the same time, and that adds up to a lot of component purchases.

In that sense, this revenue drop looks be more of a deferment that a true loss of business.  That said, it is still a painful one for Intel's investors.  The company's stock fell  1 a quarter percent following the news, which aired lated yesterday.

Source: Intel

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RE: hmmm....
By MrTeal on 12/13/2011 3:53:01 PM , Rating: 2
Only in the long term. There are only so many fabs making NAND flash right now, and the SSD market is still fairly niche compared HDDs. There's only so much flash out there and fabs are expensive and time consuming to build, so it's not like they could just transition people over to SSDs. We're stuck with hard drives for awhile

According to Gartner, in 2010 the NAND industry produced just over 11 exabytes of flash, of which ~10 exabytes went to consumer devices like smartphones, tablets and SD cards. Only 0.86 exabytes was used in SSDs. They predicted production rising to 21 exabytes in 2011, with 91% of that going consumer devices.
Total laptop storage for 2011 is expected to be 91 exabytes with an average capacity of 350GB, so even if the 1/10th of just the laptops out there started shipping with 120GB SSDs instead of mechanical drives, you'd need an extra 3.2 exabytes of NAND production. That doesn't even factor in desktops. There just isn't the extra capacity to move a decent percentage of computers over to SSDs, even with an almost doubling of capacity from 2010 to 2011. According to the numbers I read, the capital cost to build a fab to produce 3.75 exabytes is about $10 billion, so it's not like they can be brought online quickly.

"Well, there may be a reason why they call them 'Mac' trucks! Windows machines will not be trucks." -- Microsoft CEO Steve Ballmer

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