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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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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.

kXk


By StevoLincolnite on 9/9/2012 11:36:19 AM , Rating: 2
quote:
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.


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