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PCs drive Intel's earnings, but 'Bay Trail' Android tablets are on the horizon

Mark Hachman | Jan. 20, 2014
In a twist, processors designed for consumer PCs outperform Intel's expectations, while the usually reliable Xeon chips fall short.

intel desktop

Who would believe that Intel's chips for consumers--specifically consumer desktops--would be the bright spot in Intel's earnings report?

While there's no reason to believe that Intel's fourth-quarter earnings contradict the conventional wisdom that the PC market is on the wane, optimists might point out that's exactly what happened. Stacy Smith, Intel's chief financial officer, said that Intel saw PC sales for the fourth quarter at higher levels than what the chipmaker tracked a year ago--and disclosed aggressive plans to push into the Android tablet market in 2014.

All told, Intel reported fourth-quarter revenue slightly highly than what Wall Street expected--a 3 percent increase to $13.8 billion over last year's fourth-quarter figure. Profits were just about flat at $2.6 billion, versus $2.5 billion a year ago, missing analyst estimates by a penny a share.

"Given the PC market was in the toilet and the phone and tablet division didn't financially perform well, they did well in 2013," Pat Moorhead, principal with Moor Insights & Strategy, said in an email. "In 2014, Intel will need to turnaround mobility, defend the datacenter from AMD, ARM, and Broadcom, and gracefully enter the growing Internet of Things client market."

PC power
So what happened?

Intel's performance in the PC Client Group business actually outperformed its PC customers. For 2013, market-research firm IDC said, total PC shipments declined 10 percent. But for the same period, Intel's PC business declined just 4 percent, to $33 billion. (Rival AMD may have soaked up some of that red ink.) And while sales of Intel's notebook chips suffered--down 4 percent in terms of both prices and unit volume--the prices of Intel's desktop chips actually rose 6 percent throughout the year.

And within the desktop PC space, Intel forged success from a number of different components.

"Some of the contributions of fourth quarter was the XP transition, which is really what you are talking about," Intel chief executive Brian Krzanich told analysts during a Thursday conference call. "We don't think that was the only thing. As I said, it was most--a lot of the growth came from desktop, but the desktop was largely enterprise in the mature markets. That really, we think, has to do with a lot of great form factors that are coming in the all-in-ones, the great innovation that's coming in there. We saw some of the highest units of [Core] i5 and i7 in the enthusiast area. I think those are some great gaming platforms. So we think there is a lot more to the desktop growth. We also introduced the Haswell-based NUC, which is a smallest form factor desktop machine that you can have. So it's those kinds of innovations that are driving this desktop growth as much and more than the software transition."

 

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