The worldwide leader in computer processor chips that provides 80 percent of all PC manufacturers with the key component is feeling the slowdown in the global economy in a very big way. Intel (NASDAQ:INTC) announced that it is reducing its revenue forecast for the third fiscal quarter by $ 1 billion as customers have pared their inventories and are waiting and watching to see what the PC market does next. The company has struggled over the past several quarters to accurately estimate the demand for its chips as the PC market feels the threat from tablets and smartphones increasing. The incredible success of the Apple (NASDAQ:AAPL) iPad and several Google (NASDAQ:GOOG) Android-based tablet devices has wreaked havoc on the normally predictable PC market. Add to the mix the dramatic growth of smartphones as a access point to the internet and you begin to see the enormous challenge that the microchip maker is now facing. The company had forecast revenue of $ 14.8 billion and now estimates revenue will be $ 13.5 billion or lower as consumers in the U.S. and Europe hold-off on buying new PCs. Bloomberg reported that the company withdrew its full-year forecast and will provide an update at its third quarter earnings meeting on October 16th.
Waiting For Windows 8
Some analysts have blamed the introduction of the next Microsoft (NASDAQ:MSFT) Windows 8 operating system for fewer orders from PC makers who are not sure what the release of a new operating system will have on consumer buying behavior. The new operating system will fully support touchscreen devices such as tablets, including the new Surface tablet from Microsoft as well as provide a variant of Windows 8 for mobile applications including the new Lumina series from Nokia. Industry experts note that Microsoft may be able to gain significant market share that it lost to Google Android over the years when Microsoft failed to get on the “mobile computing bandwagon” and had to play catch-up. At the present time, Google Android holds over 50 percent of the market share of mobile devices, with Apple coming in at more than 30 percent, leaving just over 10 percent for Microsoft and others to fight over.
New Chips, More Power, Less Battery
Intel has been hard at work developing the next generation of microchips codenamed Ivy Bridge which are used in the Ultrabook line of laptops that are manufactured by several PC makers. Another low-power consumption chip named Haswell is expected to be available in some of the laptops that will be on sale for the holiday shopping season soon. The Haswell chipset improves processing time and graphics and is reported to cut battery consumption by nearly one-half. Despite these innovations, Intel has not been as successful with its mobile computing chipset named Medfield. It has been reported to be battery-hungry and thus far is only available on phones sold in India, Russia and the United Kingdom.
What To Expect From Earnings
Many analysts are genuinely confused by the recent revision to third quarter revenues by $ 1 billion. As recently as May the company performing well enough to announce an increase in the quarterly cash dividend and received praise from analysts who at the time felt that the company had managed to avoid the global economic downturn that its Asian counterparts had succumbed to. The company has commented that while the data center business segment is performing well, that the enterprise PC market (government and businesses) is slowing and emerging market demand has declined as well. The company has returned significant cash to shareholders over the years – $ 110 billion since 1992 – but it is the present that investors are now concerned about and that the company must now deliver a solution.
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