Intel's PC Business Grows in Q4, but Server Chip Sales Still Lag

CEO Brian Krzanich said new form factors helped fuel a slight rebound in PC chips, but U.S. government budget battles helped hold back enterprise business.

Just as Intel officials began to see a little life in its PC chips business in the most recent financial quarter, sales of its enterprise servers showed more softness than expected.

Like many tech vendors that are closely tied to the ailing global PC space, Intel's financial numbers over the past couple of years have been impacted by the declining sales of desktops and notebooks. However, in the fourth quarter of 2013, the giant chip maker saw revenues of its PC Client Group grow 2 percent over the previous quarter, and remain flat over the same period last year.

The PC desktop business was particularly strong, according to CEO Brian Krzanich, with quarterly revenues growing 11 percent. In addition, the company saw record shipments of systems powered by Intel's Core i5 and i7 chips during the quarter. Much of the bump in desktops was in corporate systems, which was in part due to the migration of companies from Microsoft's aged Windows XP operating system to Windows 7 or 8, Krzanich said during a Jan. 16 conference call with analysts and journalists to discuss the financial numbers.

He also said the new form factors hitting the market—such as all-in-one and 2-in-1 systems, which can be used as both a notebook and a tablet—has helped boost the PC numbers. Intel has been a strong proponent of such form factors as a way to rejuvenate the PC market, pushing both its Core "Haswell" chips and low-power Atom platform for such systems.

"That really … has to do with a lot of great form factors that are coming in the all-in-ones, the great innovation that’s coming in there," Krzanich said. "We saw some of the highest units of i5 and i7 in the enthusiast area. I think those are some great gaming platforms. So we think there is a lot more to the desktop growth. We also introduced the Haswell-based NUC [Next Unit of Computing], which is a smallest form factor desktop machine that you can have. So it’s those kinds of innovations that are driving this desktop growth as much and more than the software transition."

For the year, the PC Client Group saw revenues of $33 billion, down 4 percent from 2012. IDC analysts last month projected that PC shipments worldwide will fall by 10.1 percent in 2013, with consumers and business users alike spending more of their money on tablets and smartphones.

"While the PC market was down on the year, we saw the market stabilize in the back half of the year, with fourth-quarter PC units up from a year ago," Chief Financial Officer Stacy Smith said. "Additionally, we saw strong tablet growth in the back half of the year and inclusive of PC and tablets our unit growth in the fourth quarter was up almost 10 percent from a year ago."

Intel officials hope to fuel continued growth in the PC space, noting plans this year to launch the 14-nanometer "Broadwell" processors.

"We are well on our way to reinventing the personal computer," Smith said. "With all-in-ones, 2-in-1s, convertibles and detachables, the amount of innovation in the PC market is unprecedented. Building on this leadership, we will start production of wafers on Broadwell, a 14-nanometer product targeting these form factors, in the first quarter. In the tablet market, we launched the Bay Trail SoC [system-on-a-chip] and have started to expand our footprint and market signature in this growing market."