How Intel Can Thrive As PC Sector Lags
Chris Lau, Kapitall: When Intel (INTC) revealed a rise in inventory sitting in its distribution channels, it was a blow for investors still waiting for the PC sector to improve. Intel acknowledged that the Haswell chip refresh will not yield stronger sales in the short term. Not until late August or early September will Intel gain a better sense of its recent sales trends.
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Yet despite the fact that weakness in the PC sector is expected to continue, Intel looks positioned to thrive.
Inventory grew in Intel’s second quarter. The company attributed the increase to customers beginning to build PCs based on the Haswell processor line-up. Overall, inventories remain well-below historical averages. Intel expects revenue to be at the same level as last year. To adjust for a weaker PC market, Intel is reducing its capital expenditure by $1 billion, to $11 billion. Gross margins are expected to be 59%, as opposed to the prior forecast of 60%.
For the next quarter, Intel forecast revenue would be $13.5 billion, up 5% from last quarter. Gross margins are expected to increase by 3 percent, to 61%.
Haswell in Focus
Intel is diversifying away from traditional PCs, into such devices as ultrabooks. The refresh of chips, including the Haswell, could still improve margins and profits. Intel released quad core products last quarter and this quarter, dual core processors will follow as lower priced products. For now, Intel will not be able to determine if sales will improve, but the chips do offer some innovation for consumers. Devices can now be built without the need for fans to cool the chip. In 2014, the Bay Trail chip will introduce even more innovation – at only 14 nanometers, it will use even less power or produce less heat.