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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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A ruse too far
By Beenthere on 9/7/2012 3:09:42 PM , Rating: 2
No amount of marketing dollars is going to convince the majority of consumers to buy an over-priced, under performing, shiny brick, aka Ultrabook.

Intel also forgot there is an reported economic depression pummeling the U.S., Urrup and Asia. 100 million unemployed people have lost their ability to purchase PC goods or other discretionary goods.

RE: A ruse too far
By silverblue on 9/7/2012 5:21:22 PM , Rating: 4
Amusingly, if you slap an Apple logo on it...

And because laptop manufacturers keep overcharging for APU-powered devices, it's not helping AMD either (nor, for that matter, allowing them to clear inventory quick enough to bring Trinity out in a timely fashion).

RE: A ruse too far
By Jeffk464 on 9/8/2012 4:59:57 PM , Rating: 2
I personally like the ultrabook concept and see it as having a whole lot more functionality than a tablet. Nope, great potential, keeping making them thinner, lighter, with better battery life, possibly make them arm based(yeah I know "ultrabook" is an intel spec)

RE: A ruse too far
By Jeffk464 on 9/8/2012 5:08:59 PM , Rating: 2
Personally I think 5"ish phones, aka phablets can fill people's needs for tablets and then you use ultrabooks for more serious computing. I know I feel no need for the new affordable 7" tablets as I would rather just have the functionality on one device.

RE: A ruse too far
By paydirt on 9/10/2012 8:44:43 AM , Rating: 2
The $13B number is revenues. Earnings is what is left over after costs.

RE: A ruse too far
By MrBungle123 on 9/10/2012 3:59:35 PM , Rating: 2
I am wondering if this is the result of the software being so far behind the hardware... Is joe average user with a 6 year old C2D going to upgrade? whats the point? A 5 or 6 year old computer can still do just about everything non-enthusiasts/gamers (85%+ of the market) would want to do just fine... hell a C2D or C2Q with a decent graphics card can run every game i can think of.

Without software that runs frustratingly slow people will replace computers when the hardware fails not because they are too slow which means much longer upgrade cycles and lower sales for Intel and the like.

"A politician stumbles over himself... Then they pick it out. They edit it. He runs the clip, and then he makes a funny face, and the whole audience has a Pavlovian response." -- Joe Scarborough on John Stewart over Jim Cramer

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