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Intel Uncertain About Near PC Future, Windows 8 Impact

By - Source: Tom's Hardware US | B 42 comments

Over the past decades, Intel has always been an early indicator of economic trouble in IT and it has always been the spearheading horse to pull an entire industry out of a downturn. This time may be different.

If there is a single sentence that can summarize the company's Q3 earnings call, it would be, "We just don't know."

Intel's quarterly result was slightly above the previous guidance and came in at revenue of $13.5 billion, and net income of $3.0 billion. That is not exactly shabby, but does not reflect some tough spots. PC client revenue was down 8 percent from last year; server CPU revenue were up 6 percent from last year, but down 5 percent sequentially; and other architecture group revenue was down 14 percent year over year. Conclusively, Intel said that Q3 revenue reflected "a continuing tough economic environment."

Of course, Intel has prepared itself with a strong product offering for the year-end finish line and it has fueled the ecosystem with pretty much everything it could to spark innovation. For example, it sent out its engineers to help vendors to design their products and fine-tune them to meet performance expectations. Compared to previous product launches, this has been an unprecedented effort in its scale. During the earnings conference call, CEO Otellini stressed that there will be more than 140 Core-based Ultrabooks to be launched with Windows 8, 40 of which will feature touch screens. The $699 price point will be met and there will be even "bridge SKUs" that will beat that price, he promised. The executive also noted that there will be a handful of Ivy Bridge-based enterprise tablets in Q4, as well as about 20 Clover Trail-based consumer-targeted designs running Windows 8.

This is everything but a weak showing for an operating system launch as disruptive as Windows 8. So. it is even more puzzling how much doubt Intel expressed about the near future of the PC market. There seem to be so many variables in play at this time, and so much uncertainty about the consumer market that even Intel appears to have become uncertain about what to expect. Otellini said that "Q3 PC sales grew approximately half of the seasonal norm and reflected flat enterprise sales." Some improvements were seen at the end of the quarter due to Windows 8 system production, the CEO stated. However, for Q4 Otellini noted that Intel expects that the "overall PC business will grow at about half" of what is typical for the seasonal change. Keep in mind that this is not your average Christmas season. This is the season when Microsoft launches its most disruptive operating system since Windows 95 -- and a season that builds on an already slow quarter that reflected half of the normal seasonal growth.

Intel is apparently creating very low expectations but, in the end, it's better news to beat a low guidance than miss an overly confident forecast. But "half" the growth is pretty dramatic from every point of view, especially when we consider the impact a new Windows launch should have. Otellini remained rather distant from the expectation of Windows 8 sales, but said that Intel's "customers are taking a cautious inventory approach in the face of market uncertainty and the timing of the Windows 8 launch."

Chief financial officer Stacy Smith added that Intel's unit inventory levels are too high at this time, since the already-reduced expectation from September has not materialized yet, causing the company to scale back its utilization to bring back inventory to a much more healthy level. He also hinted that Intel is not relying on seasonality as a sales guidance anymore, which is remarkable in itself. "What we are seeing in the back-half of this year," Smith said, "I am less convinced that normal seasonality is a great guide. What we are seeing is that the customer is managing things very cautiously. Depending on how our sales go, I think we can have multiple different outcomes for [the upcoming] Q1."

On a product level, Otellini noted that it is not entirely clear to Intel what variables are impacting the current flatness in the PC market at which level, leaving an analyst to question whether the PC market could return to normal growth rates with a rather sketchy answer. He mentioned that he does not believe that the tablet is the final computing device the market is trending to at this time, but believes that currently created devices that combine notebooks with the features of a tablet are more likely to prevail and become the "high-volume runners". However, he also noted that he has no idea what this device will be and that he "honestly will not know for 12 months".

Some other topics of the earnings call included the switch to 14 nm processor production and how efficiently Intel will be able to do that. But all the upsides were not able to clear any doubts that Intel has a way out of the current slump. The last time this happened in a similar severity, following the dotcom bust, Intel aggressively pitched the investment and innovation path and the claim that only innovation can save the industry from an even deeper fall. Sure, Intel has innovation in its pockets as well, and it counts on a strong innovative showing from its customers, but the tone is much more subdued and, subjectively, less optimistic.

It is this uncertainty that may create even more concern and may raise some doubt about the real potential of Windows 8.

 

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Top Comments
  • 22 Hide
    abbadon_34 , October 17, 2012 11:09 PM
    just treat Windows 8 like Vista and ignore it
  • 17 Hide
    bison88 , October 17, 2012 11:45 PM
    Windows 8's biggest failure is that nobody needs it. There was a logical step to take going from XP to Vista, although Microsoft blundered it with lack of Software and Hardware developer support, Windows 7 was simply a correction to Windows Vista. Very little under the surface was changed, just fixed for the mainstream out the box. Most big changes came with Vista under the hood.

    Windows 8 really doesn't have a place nor a reason for being based off just what I've seen and read from the white sheet. Whether you love it or hate it matters not. There was no need to spend 3 years building Windows 8 for the PC at all since the focus always has been on the mobile platform for the OS.

    I remember a year prior to Windows 7 all my IT professors and students were just constantly talking about Windows 7 and how much it righted Vista's wrongs. Now all I hear from my IT professors and fellow colleagues every time (and only when randomly brought up), is how much Windows 8 is the silliest thing ever. The groans around the room are priceless.
  • 13 Hide
    house70 , October 17, 2012 11:44 PM
    Big corporations ignore the fact that there is a global recession going on? They expect to keep making the same kind of profits as they did before that?
    Get a grip.
    BTW, just because your bottom line is a bit smaller than last year doesn't mean the whole PC industry is doomed. You just have to tighten your belts a bit, like everyone else, roll with the punches, suck it up and ride it out. People will still need computers, even if they buy them less often than before. Same goes for other corporations, like you.

    "PC-doom" Gruener is back.
Other Comments
    Display all 42 comments.
  • 22 Hide
    abbadon_34 , October 17, 2012 11:09 PM
    just treat Windows 8 like Vista and ignore it
  • 4 Hide
    Benthon , October 17, 2012 11:16 PM
    hastenVista wasn't a complete change in concept though...


    From XP? I'd say it was almost as drastic as 8 is from 7.
  • -9 Hide
    ivanto , October 17, 2012 11:24 PM
    WTF? "for an operating system launch as disruptive as Windows 8"
    What is disruptive about Windows 8? It's Windows 7 with a strap-on of MCE/Metro GUI App. What does Win8 disrupt ?

    Android and iOS are disruptive by definition - cost less or free, are not as good as existing OSes (like Win7/Linux/OSX) but give users something they value more (easier to use touch UI and Apps in the pocket).
    But, I wish MS good luck, would hate to see them going down because consumer will loose with lesser competition.
    -IvanTO
  • 11 Hide
    jojesa , October 17, 2012 11:28 PM
    Windows 8 is very good OS on touch screen devices. I would not install it on my desktop or laptop though even if I get new systems.

  • 8 Hide
    chewy1963 , October 17, 2012 11:33 PM
    I think Win 8 is going to put a butt hurt on both Intel and MS. Especially on the desktop segment. This would be a perfect time for someone to come up with a great OS for desktops and laptops. I really like Ubuntu (with Gnome UI), but it needs a better software ecosystem then it has now. I dual boot Win 7 and Ubuntu 12.4 lts and Ubuntu seems much more efficient (CPU/RAM wise) for things like watching movies and web browsing. But I end up using 7 (great OS IMO) for most things because the quality of many applications is just so much better than Ubuntu 'equivalents' (if available at all).
  • 13 Hide
    house70 , October 17, 2012 11:44 PM
    Big corporations ignore the fact that there is a global recession going on? They expect to keep making the same kind of profits as they did before that?
    Get a grip.
    BTW, just because your bottom line is a bit smaller than last year doesn't mean the whole PC industry is doomed. You just have to tighten your belts a bit, like everyone else, roll with the punches, suck it up and ride it out. People will still need computers, even if they buy them less often than before. Same goes for other corporations, like you.

    "PC-doom" Gruener is back.
  • 17 Hide
    bison88 , October 17, 2012 11:45 PM
    Windows 8's biggest failure is that nobody needs it. There was a logical step to take going from XP to Vista, although Microsoft blundered it with lack of Software and Hardware developer support, Windows 7 was simply a correction to Windows Vista. Very little under the surface was changed, just fixed for the mainstream out the box. Most big changes came with Vista under the hood.

    Windows 8 really doesn't have a place nor a reason for being based off just what I've seen and read from the white sheet. Whether you love it or hate it matters not. There was no need to spend 3 years building Windows 8 for the PC at all since the focus always has been on the mobile platform for the OS.

    I remember a year prior to Windows 7 all my IT professors and students were just constantly talking about Windows 7 and how much it righted Vista's wrongs. Now all I hear from my IT professors and fellow colleagues every time (and only when randomly brought up), is how much Windows 8 is the silliest thing ever. The groans around the room are priceless.
  • -4 Hide
    tului , October 17, 2012 11:53 PM
    If they'll ever get virtual machine GPUs where they can use IOMMU or some other sort of pass through and get 90+% native performance I can relegate Microsoft's crap to a VM. As it stands I have to dual boot for games. Microsoft's Windows 8 has done nothing to help the PC ecosystem/economy.

    Intel's constant innovation and attempts to make inroads into the SoC sector can do nothing but good for consumers, at least in the short term. Sure they might make a bit less, but as a previous poster said, the global economy is on the ropes. Are investors really so greedy that they can't stomach reduced growth for a couple of quarters? Normal people deal with no growth in their paychecks for years at a time.
  • -7 Hide
    southernshark , October 18, 2012 12:17 AM
    I am looking forward to Windows 8.

    I do not believe that serious enthusiasts are upset about Windows 8.

    Rather it is the dumbs.... the people who can't figure out how to turn Metro off... the seriously stupid LOL KATS crowd who slurk along the mainstream pathways of the cybernet.
  • -1 Hide
    mightymaxio , October 18, 2012 12:25 AM
    Windows 8 is awesome, I love the new OS been running it since the start of my dreamspark premium membership. For those who don't like change such as Metro use classic shell which has been around for ages. It changes it to Windows 7 UI with all the improvements 8 has on speed.
  • 5 Hide
    frombehind , October 18, 2012 12:25 AM
    chewy1963I think Win 8 is going to put a butt hurt on both Intel and MS. Especially on the desktop segment. This would be a perfect time for someone to come up with a great OS for desktops and laptops. I really like Ubuntu (with Gnome UI), but it needs a better software ecosystem then it has now. I dual boot Win 7 and Ubuntu 12.4 lts and Ubuntu seems much more efficient (CPU/RAM wise) for things like watching movies and web browsing. But I end up using 7 (great OS IMO) for most things because the quality of many applications is just so much better than Ubuntu 'equivalents' (if available at all).

    The REAL problem with linux and OSX is that they do not support DirectX (which is what all games run on these days) preferring Microsoft's closed code platform to the more open OpenGL platform. As we saw with HP's experiment, an OS is useless, and is judged heavily by what software it can run.
  • 0 Hide
    frombehind , October 18, 2012 12:28 AM
    bison88Windows 8's biggest failure is that nobody needs it. There was a logical step to take going from XP to Vista, although Microsoft blundered it with lack of Software and Hardware developer support, Windows 7 was simply a correction to Windows Vista.

    Well, they might do what they did with Vista... by releasing DirectX 12. All of a sudden if you want to play the latest games, you must upgrade to their new OS. That was the only reason people went from XP to vista, cuz Xp so support DX 11.
  • 7 Hide
    sykozis , October 18, 2012 12:32 AM
    southernsharkI am looking forward to Windows 8.I do not believe that serious enthusiasts are upset about Windows 8.Rather it is the dumbs.... the people who can't figure out how to turn Metro off... the seriously stupid LOL KATS crowd who slurk along the mainstream pathways of the cybernet.

    There's really no reason to "turn off" Metro... It's easy to config the system in a manor that Metro only appears at startup. I see Metro once a day...and that's at startup. Aside from that, I'm on the desktop until I shutdown or reboot.

    Intel gave us an excellent processor with Sandy Bridge....leaving little reason to jump on Ivy Bridge knowing that Haswell is coming with a new socket.

    MS gave us an excellent Windows release with 7 leaving little, if any, reason for most to "upgrade" ....

    The economy sucks.....alot of people are struggling to makes ends meet. Which comes first? Bills or computers?...
  • 3 Hide
    Wamphryi , October 18, 2012 12:52 AM
    I was around for the Win 95 launch and it was a similar situation. People did not want the Start Button and cursed the end of the command line interface (though it actually lives on of course).

    It was harder also in that Win 95 had serious system requirements for the day and when $300 US bought you a mighty 4 MB of RAM and HDD's were sold in MB's not GB's upgrading was expensive.

    People will adapt and the IT Industry will survive and grow as people get used to change. Win 8 is needed to bring the mobile sector to the PC which will help insure its survival. The internet bases its success on linking people together not just machines not matter how whizz bang they may be. Win 8 will do the same by keeping the PC with the masses while the Win 7 model would confine the PC in a way it cannot afford to be.
  • -4 Hide
    tomfreak , October 18, 2012 1:05 AM
    WamphryiI was around for the Win 95 launch and it was a similar situation. People did not want the Start Button and cursed the end of the command line interface (though it actually lives on of course). It was harder also in that Win 95 had serious system requirements for the day and when $300 US bought you a mighty 4 MB of RAM and HDD's were sold in MB's not GB's upgrading was expensive. People will adapt and the IT Industry will survive and grow as people get used to change. Win 8 is needed to bring the mobile sector to the PC which will help insure its survival. The internet bases its success on linking people together not just machines not matter how whizz bang they may be. Win 8 will do the same by keeping the PC with the masses while the Win 7 model would confine the PC in a way it cannot afford to be.
    u dont make a PC function like smartphones/tablet. You should make a PC much smarter than mobile computers, which currently Microsoft arent heading that direction.
  • -4 Hide
    Anonymous , October 18, 2012 1:13 AM
    bison88Windows 8's biggest failure is that nobody needs it. There was a logical step to take going from XP to Vista, although Microsoft blundered it with lack of Software and Hardware developer support, Windows 7 was simply a correction to Windows Vista. Very little under the surface was changed, just fixed for the mainstream out the box. Most big changes came with Vista under the hood.Windows 8 really doesn't have a place nor a reason for being based off just what I've seen and read from the white sheet. Whether you love it or hate it matters not. There was no need to spend 3 years building Windows 8 for the PC at all since the focus always has been on the mobile platform for the OS.I remember a year prior to Windows 7 all my IT professors and students were just constantly talking about Windows 7 and how much it righted Vista's wrongs. Now all I hear from my IT professors and fellow colleagues every time (and only when randomly brought up), is how much Windows 8 is the silliest thing ever. The groans around the room are priceless.



    Thats what Bill gates when we had (460kb ?)of RAM. That's what they said before we landed men on the moon. That's what they said about GUI's. That's what they said about a lot of things. Please, the worst thing to do in the tech field is be blissfully stubborn.
  • 3 Hide
    Anonymous , October 18, 2012 1:21 AM
    Also, Intel sounds royally mad about the boost that FX procs will get from the better scheduling.
  • 2 Hide
    Wamphryi , October 18, 2012 2:03 AM
    Tomfreak

    "u dont make a PC function like smartphones/tablet. You should make a PC much smarter than mobile computers, which currently Microsoft arent heading that direction."

    The problem with that theory is that the mobile can do what the ATX PC can never do and that is sit in your pocket. Soon we will see phones and tablets that will support mini USB and mini HDMI out of the box. A user then simply plugs the monitor and a USB Hub into the phone and monitor, keyboard and mouse are ready to go. My phone is significantly more powerful than my first PC's and they continue to become more powerful. NVIDIA will push more powerful graphic solutions through phones and soon viable gaming will be on the agenda.

    The PC had to go the mobile market and prove its relevance not the other way around. The PC needs to be bigger than before and play to its strengths. Multiple Monitor set ups and raw power etc. However 80% of the PC users out there don't require the grunt we do. How fast does one need to open a word document? This would be the worst time ever for the PC industry to become an island unto itself. Win 8 bridges the divide and takes the PC into a new era. For all our sakes lets hope it succeeds.
  • 3 Hide
    SteelCity1981 , October 18, 2012 2:32 AM
    The biggest problem for Windows 8 is Windows 7. Windows 7 by in large has been so sucessful during its short reign that it was able to surpass Windows XP in overall sales 3 years and that's impressive considering Windows XP has been out 8 years longer then Windows 7 and was able to surpass it in popularity in less then half the time. Windows 8 with his modern ui controversy is not going to be able to compete with the highly popular Windows 7. The two biggest downfalls for Windows 8 will be being in direct competition with Windows 7 and it's Modern UI interface.
  • -1 Hide
    JOSHSKORN , October 18, 2012 2:47 AM
    hydac7Just ignore 8 and it will go away if it worked with Vista it will work with this

    Not quite. Windows 7 is "like" Windows Vista. I wouldn't say Vista went away. Maybe Windows 9 will be the unbroken version of Windows 8, or at least the rest of the world will be more willing to accept the idea of Windows 8 by then.
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