Intel Hammered by Sliding PC Sales, but Predicts Rebound

Intel executives say new chips such as "Haswell" and "Bay Trail" will help drive systems that will offer new features and lower costs.

Intel continues to get battered by the contracting PC market in the first quarter, but executives are predicting an uptick in business in the second half of the year as new systems armed with the chip maker's upcoming "Haswell" processor hit the market, bringing with them greater capabilities and lower prices.

CEO Paul Otellini—giving his last quarterly earnings call before he retires at the end of next month—and CFO Stacy Smith, speaking to analysts and journalists on a conference call April 16, spoke about upcoming Ultrabooks that will run as low as $499 to $599, while offering a range of features such as touch.

They also spoke about what they called a "market of computing," where the distinction between devices such as notebooks, tablets, Ultrabooks and convertible systems disappear, and with its growing range of chip offerings—from Haswell to the upcoming quad-core "Bay Trail" Atom system-on-a-chip (SoC)—Intel will have products for every device, including smartphones. Bay Trail will enable system makers to roll out high-performance notebooks in the $300 to $400 range, according to Smith.

"We can embrace this broad market for computing," and respond to wherever the demand is coming from, Smith said on the call. "We'll be participating across this broad range of computing devices as we get into the last half of the year."

PC sales continued to fall over the past couple of years as consumers and business users turn their attention—and computing dollars—to mobile devices, such as tablets and smartphones. Analysts at both IDC and Gartner on April 10 said PC shipments continued to fall in the first quarter, dropping by as much as 13.9 percent compared with the same period last year. Vendors with deep links into the PC market—such as system makers Dell and Hewlett-Packard—are being hobbled even as they look to shift their focus to the enterprise tech space.

Neither analyst firm included tablets in their PC projections, though Intel executives talked about the line between PCs and tablets evaporating. Intel's Client Group generated $8 billion in revenue, a 6 percent drop from the first quarter of 2012. Despite this, Otellini and Smith said they expect to see PC chip revenues grow in the low single digits in the second half of 2013, helped by technology such as Haswell and Bay Trail, features like touch and lower pricing.

Intel chips dominate the PC market, but the company is trying to gain inroads into the booming smartphone and tablet, where most devices run on chips designed by ARM and made by such vendors as Samsung and Qualcomm. Otellini said the company expects more tablets—some running Microsoft's Windows 8 operating system, others Google's Android—powered by Intel chips to come onto the market this year, and added that that the company is still gaining design wins in the smartphone space.

Stephen Belanger, an analyst with Technology Business Research (TBR), said in a research note that chips such as Bay Trail, "Clover Trail+" and Haswell will aid Intel in its competition with ARM.

"However, sales of the next generation of Intel-powered PCs will be threatened by weak demand and uncertainty surrounding Windows 8 adoption," he added.