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Intel profit tumbles 29% on PC sales slump

Intel profit tumbles 29% on PC sales slump
Jim Castel CNN
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Thursday, July 18, 2013 - 9:41am

Smartphones and tablets aren't killing Intel just yet, but the chipmaking giant is getting very badly bruised.

Amid an ongoing PC sales swoon, Intel on Wednesday reported its fourth straight quarter of sales declines and its third quarter in a row in which profit fell year-over-year. The company also gave a somewhat more pessimistic outlook for the rest of the year than it had previously forecast.

Shares of Intel pulled back 3% in after-hours trading.

Intel's business has struggled lately as PC sales remain very weak. Worldwide, shipments of PCs fell by 11% last quarter, according to Gartner. Tech consultancy iSuppli found that laptops turned in their worst year-over-year sales performance in 11 years.

Accordingly, sales of Intel's PC chips fell by 7.5%. They make up nearly two-thirds of the company's revenue.

To counteract the trend, Intel has desperately been trying to get into the mobile computing business. It made some limited headway recently, partnering with a handful of brands to put its chips in smartphones and tablets.

"There will always be another next big thing," Intel CEO Brian Krzanich said on a conference call with analysts. "It's our job to scan and search for emerging trends, and doing that will require some changes at Intel."

Krzanich restructured Intel's management two weeks ago with an eye toward fostering better communication and the flexibility needed to transition the company to the new ultra-mobile environment.

The new CEO, who began his job in May, said that Intel's strategy going forward can be summed up like this: "We will leave no computing opportunity untapped."

As part of that strategy, Intel will focus more heavily on its Atom lineup of mobile processors, though the company said PCs will continue to be core to the company's business.

Intel recently released its Haswell chip for PC tablets, ultrabooks and convertible laptops, but those models haven't sold well so far. The appeal of the new chip architecture is that it offers better battery life and faster processing speeds, making those devices more attractive. But Haswell chips are also expensive, making it difficult for manufacturers to lure in new customers with lower prices.

There's hope that PCs will begin making a comeback in the coming months. PCs generally perform well in the third quarter, hoisted up by back-to-school sales. Microsoft is set to release improvements to its Windows 8 operating system aimed at addressing some negative feedback and confusion from customers.

PC makers have also begun lowering prices in an attempt to boost sales. Intel said its new Bay Trail lineup of PC chips will help to lower the price of touchscreen PCs.

By the numbers: The world's largest chipmaker said its net income fell to $2 billion, or 39 cents per share, in the second quarter. That's down 29% from a year earlier but in line with the median estimate of analysts polled by Thomson Reuters.

Sales for the Santa Clara, Calif., company fell 5% to $12.8 billion, just missing analysts' forecasts of $12.9 billion.

Intel said its current-quarter sales would come in between $13 billion and $14 billion, which is a bit lower than what most Wall Street analysts had been predicting. For the full year, Intel thinks its revenue will remain flat, down from an earlier forecast of a low single-digit percentage increase.

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