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Ultrabooks may not be selling as well as expected; 7.7 percent drop in outlook warns of trouble ahead

Intel Corp. (INTC) on Friday announced a trimming back its Q3 2012 earnings predicition from an already gloomy $14.3B +/- 0.5B USD to $13.2B +/- 0.3B USD.  The 7.7 percent dip was blamed on a variety of factors.

Specifically, Intel writes:

[Intel] is seeing customers reducing inventory in the supply chain versus the normal growth in third-quarter inventory; softness in the enterprise PC market segment; and slowing emerging market demand. The data center business is meeting expectations.

So what does that mean?

The inventory reductions could be attributable to several factors.  First, Windows 8's touch-screen mandate for laptops may be leading to supply chain frustrations due to tight supply for the fast-growing display technology.  Second, some OEMs have expressed concerns regarding the risk that Microsoft Corp.'s (MSFT) Windows 8 could be poorly received by customers.  Changes like the unwrapping of the Start Menu into the new "Windows 8 Theme" side screen have outraged some Windows traditionalists.  

Third, OEMs are moving towards the competition -- ARM Holdings, Plc.'s (LON:ARM) titular architecture.  OEMs appear to be responding to ARM's conquest of the tablet and smartphone space by racing their Windows RT (ARM Windows 8) products to market.  Lastly, OEMs may be reacting to weaker than expected Ultrabook demand, slowing purchase orders.

David Schmook, head of North American operations at Lenovo, said in a previous interview, "[Intel meeting its 2012 ultrabook targets is] going to require a very strong first couple of weeks of launch of Win 8.  They’ll be a lot bigger than they are now. I don’t know if it will get all the way up to 40 percent."

ARM chip on penny
The mobile sector's biggest winner, ARM is now looking to horn in to Intel's PC hegemony via its power-efficient system-on-a-chips. [Image Source: Digital Trends]

The good news for Intel is that ARM chipmakers who rely on third party fabs like Samsung Electronics Comp., Ltd. (KSC:005930) and Taiwan Semiconductor Manufacturing Comp., Ltd. (TPE:2330) (TSMC) have barely squeaked onto the 28 nm node.  Meanwhile, Intel is already mass-producing at 22 nm and will move to 14 nm node in 2014.  Samsung has plans for 14 nm, but it appears Intel is at least a bit ahead at the moment.

Intel did offer another scrap of good news -- it thinks it can repurpose existing machinery/resources at its fabs for the 14 nm die shrink, which it says will allow it to cut capital spending from $12.9B USD to $12.1B USD.  That should help it post a bit better net earnings numbers come Q3's official figures.

Source: Intel

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Beginning of the end in my opinion
By aurareturn on 9/7/2012 1:02:57 PM , Rating: -1
A less dominant Windows platform + disruptive technology = smaller future for Intel.

They'll stay in the consumer space for the next 5-6 years - then become an enterprise only company.

RE: Beginning of the end in my opinion
By StevoLincolnite on 9/7/2012 1:07:08 PM , Rating: 2
Or god forbid... They could just actually compete with Arm on all fronts, Medfield was a good stepping stone, but they do need to push harder especially with the goodness that is Binary Translation to run both Arm and x86 code.

By Jeffk464 on 9/8/2012 4:51:19 PM , Rating: 2
ARM has competitive forces helping it out that X86 lacks right now. I'm glad to see MS supporting ARM just so we will have more choice down the road in low power laptops. Its never good for consumers when one company completely dominates.

RE: Beginning of the end in my opinion
By Khato on 9/7/2012 1:21:01 PM , Rating: 5
That is indeed one possibility.

The other is that Silvermont based Atom products beat ARM offerings on both performance and power resulting in Intel beginning to take over the mobile markets. Which could quickly cascade into a complete process dominance as TSMC, Samsung, and Global Foundries can only keep up on node shrinks if they have adequate throughput.

RE: Beginning of the end in my opinion
By Samus on 9/8/2012 2:27:18 AM , Rating: 2
I'm with you Khato, but the real solution is for Intel to slowly ditch x86, especially in the mobile space.

This might require licensing from ARM to compete in the near-term, for long-term, Intel could put themselves in a position to sell their own RISC architecture.

RE: Beginning of the end in my opinion
By Jeffk464 on 9/8/2012 4:54:41 PM , Rating: 2
Intel has thrived by being about the only game in town for years. If they go into the arm market they will have stiff competition. All in all, MS deciding to build an arm version of windows is a major blow to intel.

By KamiXkaze on 9/8/2012 7:12:58 PM , Rating: 2
In some ways Intel going into a newer market would force Intel to innovate for a change.


By StevoLincolnite on 9/9/2012 11:36:19 AM , Rating: 2
I'm with you Khato, but the real solution is for Intel to slowly ditch x86, especially in the mobile space.

Not at all.

Intel x86 medfield chips can run Arm and x86 code with Binary Translation (It has it's issues, but it's a great concept non-the-less.)
So all they need to do is beat Arm in Price, Performance and Power consumption and features; as Medfield already has the best of both worlds as far as compatibility is concerned.

RE: Beginning of the end in my opinion
By tayb on 9/7/2012 1:50:22 PM , Rating: 2
Or they will utilize their engineering and process advantage and become a dominant player in the mobile space. That's a scary proposition because Intel has been known to take it easy when there is no pressure. Right now, there is pressure.

RE: Beginning of the end in my opinion
By ChronoReverse on 9/7/2012 2:57:59 PM , Rating: 2
Sometimes I wish Intel still made ARM chips simply because an A15 design using the generation lead in process Intel has would be amazing.

RE: Beginning of the end in my opinion
By tat tvam asi on 9/7/2012 5:18:54 PM , Rating: 2
Going with ARM will not be an honorable thing for Intel, but MIPS, maybe?

MIPS claims that the proAptiv core will be half the size of ARM's anticipated Cortex-A15 CPU, but will offer the same performance -- if not more.

By someguy123 on 9/7/2012 5:23:53 PM , Rating: 2
I don't think they'll produce anything that may compete in mobile except atom and possibly powerVR (until they manage proper gpus). Their atom phone managed to do pretty well in performance/battery life so I'd say it's likely that they see x86 mobile as a real possibility, especially with surface coming soon.

RE: Beginning of the end in my opinion
By retrospooty on 9/7/2012 2:40:19 PM , Rating: 3
"They'll stay in the consumer space for the next 5-6 years - then become an enterprise only company."

LOL... priceless.

By Samus on 9/8/2012 2:29:25 AM , Rating: 2
I'd buy that for a dollar!

By Jeffk464 on 9/8/2012 4:45:54 PM , Rating: 2
Wow, that's a crap load of money and it only one quarter.

By Jeffk464 on 9/8/2012 4:47:50 PM , Rating: 2
Get the price down a little more and you will start moving more ultrabooks.

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